China’s housing price: Where are the bubbles?

This chapter investigates evidence of housing bubbles in different locations of China by looking at data at the provincial and city levels from late 1990s to 2016, using the price-to-rent analysis and the generalized sup-Augumented Dickey-Fuller Test (GSADF) test. The price-to-rent ratio analysis indicates that housing bubbles began to develop in Shenzhen and Xiamen as early as 2007, while the bubble in Beijing, Hangzhou, Ningbo, Hefei, and Wenzhou started later in 2009. Those findings are largely consistent with results of the GSADF test. We also observe that the government intervention has been quite effective in maintaining a relatively stable upward trend in housing prices by timely interventions either to revive a depressed market or dampen an overheating market. Even though it has been propping up the upward trend in housing prices, even allowing it to rise in an explosive pace at times, it also does not hesitate to use policy intervention to cause moderate downward adjustments to avoid spectacular burst.