Causes and Determinants of Real Estate Bubbles in China – A Study into Beijing

The real estate market of Beijing is under investigation in order to find whether there is a potential housing bubble in China. Housing bubble as a phenomenon will be analyzed. Furthermore, the residential market of China and whether various programs for the housing policy affect housing market are presented, especially during the period 1998-2014. The Ηukou registration system gives interesting information about the housing market, the central government’s policy, and its reaction and ability to cope with a housing bubble. Ηukou registration number defines whether an individual comes from a rural or an urban area, as well as the locality.

The urban and rural residents with agricultural or non agricultural Ηukou have different rights, and thus different chances for housing, especially in large metropolitan areas like Beijing. The connection of the four state owned banks with the housing market and their reaction to the house price changes during our period of interest is analyzed. The banks reacted without taking into account the risk, because they think that they are too big to fail. Volatility is also analyzed because it is important to find the reasons behind the changes in house prices. House price volatility forces households to buy a house to live in so that they could avoid the fluctuations in house prices, and a potential price increase. Regions in Beijing do not have the same property characteristics and potentials for a real estate bubble.

The results from the research of the secondary data are presented, with some final discussion. The answer for a housing bubble in Beijing is not crystal clear. Various findings support the existence of a bubble and some others do not. Although Beijing and regions in Beijing show a house price trend above the equilibrium price, the political status quo is special. In addition, it depends on the way data are collected, the availability of data, as well as their validity. It also depends on whether we have unclear property rights, housing inequality, and not a wide freedom of choice for the households.

While there are many factors that contribute to the formation of housing bubbles, as it is a very complex phenomenon, the present dissertation is focused on some important issues revealed from the literature review. Specifically, the above hypothesis is tested considering the following issues:

• The correlation between potential real estate bubble and changes in housing prices in Beijing
• The correlation between potential real estate bubble and housing prices volatility in Beijing
• The role that the banking sector plays to the potential real estate bubble in Beijing
• The readiness of Chinese authorities to deal with a Real Estate bubble
  The so far reaction of Chinese authorities to imbalances and housing price volatility
• The correlation between the residential market in China and Beijing and a potential real estate bubble
• The correlation between the Hukou system in China and a potential real estate bubble

Housing Bubble Dissertation Contents

1: Introduction
Rationale
Aim and Objectives
Hypothesis
Dissertation Structure

2: Literature Review – Housing Bubbles
Definition of Bubbles

3: Literature Review – The Role of House Prices and Volatility
Changes in Housing Prices
Volatility

4: Literature Review – The Role of the Banking Sector
The Banking Sector in China

5: Literature Review – The Role of Chinese Authorities
Government Involvement in Urban Housing
Government’s Reaction

6: Literature Review – Residential Market in China and Beijing
Residential Market in China and Beijing – A Historical Perspective
Housing Provident Fund (HPF)
Economical and Comfortable Housing Program (ECH)
Cheap Rental Housing Program (CRH)

7: Literature Review – Hukou Registration System
Description of Hukou Registration System
Housing Finance System
Inequality in Beijing

8: Research Methods

9: Data Analysis
Is There A Potential Real Estate Bubble In Beijing?

10: Conclusion

References

View This Dissertation Here

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