Impacts Of Changes In Stock Prices And CPI On House Prices In Core Cities Of The Greater Bay Area

The movements of our stock market are closely linked to the state of its economic development.The change of stock price is an important barometer that reflects Chinese economic conditions.The current state of development of China’s real estate market is significantly affected by the changes in the general economic conditions in the country.To examine the impacts of the changes in the economic situations on the real estate market development,this thesis examines the impacts of stock price changes on urban real estate markets in order to shed new light on how our current real estate prices are affected by the economic conditions,thus having remarkable practical significance.Compared with traditional macroeconomic indicators such as(Gross Domestic Product)GDP,stock prices are more frequently available and can reflect economic developments and fluctuations more quickly.In addition,the Consumer Price Index(CPI)is also an important indicator to reflect the healthy operation and development of the Chinese economy.The change of the CPI can not only affect the level of asset prices but also usually have a significant impact on economic development.Therefore,based on the data of urban housing prices,stock prices and CPI in both Shenzhen and Guangzhou,this paper uses Vector Autoregression(VAR)model and Time Varying Parameter-Stochastic Volatility-Vector Autoregression(TVP-VAR)model to compare and analyze the impacts of relevant stock price index changes and consumer price index changes on housing prices in these two cities and their linkage relationships and to deeply investigate the law of intrinsic connection among the stock markets,residential consumer markets and urban real estate markets.This thesis mainly carries out research from the following aspects.Firstly,VAR model is used to examine the relationship among changes in the relevant stock prices,consumer price indexes and housing prices in both Shenzhen and Guangzhou.Secondly,the TVP-VAR model is further used to analyze the linkage relationship among these variables in the two cities,and the differences between the analytical results of these two types of VAR models are also compared.Finally,in order to further investigate the robustness of the research results,this thesis also further compares and studies the similarities and differences between the relationship among changes in the related stock prices,CPI and new housing prices and the relationship among changes in the related stock prices,CPI and second-hand housing prices in the two cities of the Greater Bay Area.The research results show that higher local stock prices positively boosted housing prices in the two core cities of the Greater Bay Area,implying the existence of a more significant wealth effect;the local CPI increase also drove up housing prices in both Shenzhen and Guangzhou,showing that the increase in the local CPI contributed to the increases in housing prices in both cities.However,it is worth noting that this paper also finds that the changes of housing prices in core cities of the Greater Bay Area will also affect the changes of local stock prices and CPI,probably because movements in housing prices are more closely linked to the development of the local economy.For example,the rise in housing prices in Shenzhen would promote the rise in local consumer price in the short term,while higher housing prices in Guangzhou caused local consumer price increases in the short term mainly from the middle of2013 to 2015.In addition,this thesis also finds that the CPI change in Shenzhen had a significant positive impact on the price of new housing in Shenzhen in the short run,but it negatively affected the change of second-hand housing prices in Shenzhen in the short term.This may be related to the different market demands for these two types of houses.CPI changes in Guangzhou city also significantly and negatively influenced on Guangzhou second-hand housing prices in the short term,but the short-term impact on Guangzhou new housing prices showed a different situation.This may be because the new housing prices are more significantly influenced by housing regulation policies and are not entirely determined by market factors.Based on the research findings above,the thesis also puts forward constructive relevant policy recommendations.For example,to prevent the emergence of asset price bubbles and guarantee the security of our economic and financial system,the government should strengthen the investigation and research on the relationship between stock prices,inflation and housing prices.And the government should also focus on monitoring the flow of funds from the real economy into the real estate market in order to promote the healthy and stable development of the real estate market.