Research On The Housing Price Ripple And Spillover Effect Dominated By ’SOURCE’ Cities

Currently housing price volatility has been attention around the world. The housing market is a regional market. There is a significant heterogeneity between the prices, but not to the exclusion of the spatial interaction. Multinational empirical analysis found that the residential prices of some cities especially in some areas of the central city would first fluctuate, and would play a role as leader to the surrounding cities driving its consequent fluctuations, which is so-called ’ripple and spillover effect’. The paper is to study the ripple and spillover effect of residential market in the Yangtze River Delta region. Firstly, we consider whether there is a ripple and spillover effect in the Yangtze River Delta region. If the existence of a ripple and spillover effect, we will get the ’source point’ cities and spillover effects of the ’source point’ to other cities.The study has tested for a ripple and spillover effect in the residential market in the Yangtze River Delta region by applying six linear and panel unit root tests to the ratio of urban to regional house prices for 28 cities. Compared to the linear unit root tests, there is overwhelming evidence of a ripple and spillover effect with the panel unit root test in the Yangtze River Delta region. The linear unit root tests show that segmentation is restricted to a small group of cities such as Shanghai and Suqian and Huaian for which there is no long-run relationship with the average of the Yangtze River Delta region. Univariate LM unit root test with one or two breaks is applied to the ratio of urban to regional house prices for 10 cities in the Yangtze River Delta region, to verify the influence of structural breaks to inspection results and the location of the structural breaks. The first set of breaks occurs in the sub-prime crisis (2007-2008), and the second set of breaks occurs in the stage of deepening the national real estate control (2011-2012). The two structural breaks generally reflect the idea that the location of the breaks in urban/regional house price ratios in this study are broadly linked to recessions and periods of subsequent economic recovery and strengthen and weaken of administrative regulation.The residential market in the Yangtze River area is divided into Jiangsu, Zhejiang, Anhui regional sub-markets and two-grade ’source’ city combined market. The paper employs the multivariate Granger causality analysis to obtain housing market conduction path. When the residential market in the Yangtze River region is affected by external shocks, the house prices of one-grade ’source’ cities take the lead in fluctuating, and drive the fluctuation of two-grade ’source’ cities, and finally drive the fluctuation of other cities in each regional sub markets by two-grade ’source’ cities. From the conduction path of the ripple and spillover effect in the Yangtze River area, we find the common perception that house prices in these few developed cities lead the house price cycle in the Yangtze River area. Their downswing and growth in these cities generally appear greater than in other cities, and overflow to other cities after a certain period of time.Respectively, the paper employs the generalized impulse response function analysis to the two-grade’source’ city combined market, Zhejiang, Jiangsu, Anhui regional sub markets, in order to find the spillover effect of one-grade ’source’ cities to two-grade’source’ cities and two-grade ’source’ cities to other cities in each sub market, including overflow direction and overflow intensity and overflow velocity. In the paper, we get a preparative comparison of ’source’ cities house prices for a single ’non-source’ city house price, and vertical comparison of a single ’source’ city house price for all of ’non-source’ city house prices. We find the spillover effect of more developed’source’ city to other cities is better than other ’source’ cities. This reflects the above results that their fluctuation amplitude and speed of more developed citied is more obvious than other cities, and transmit to other cities faster and stronger.The findings of this research make certain contributions to the improvements of research system of ripple and spillover effect among regional house prices, and could be referenced by other markets of other cities. From the practical point of view, it is conductive for real estate developers to formulate development strategy, for investment and home buyers to purchase real estate products, for government to formulate regulation of the real estate policy, but also conducive to the coordinated development of urban residential market.