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Was China's Housing Boom a Bubble?

Author

Listed:
  • Carlos Garriga
  • Aaron Hedlund
  • Yang Tang
  • Ping Wang

Abstract

This article investigates the factors influencing nationwide and city-level house price trends in China during the 2000s and early 2010s, considering the country’s significant structural transformation and urbanization. The analysis reveals that "fundamental forces" effectively explain house price appreciation at the national level and in most cities, with Beijing and Shanghai being notable exceptions. Income growth is the primary driver of rising house prices, while population growth also plays a significant role. However, in many cases, the impact of population growth on house prices is mitigated by an accompanying increase in land supply. China’s unique housing market landscape, particularly "hukou" migration restrictions, shapes house price dynamics and the responsiveness of migration to income growth, thereby amplifying the impact on house price appreciation.

Suggested Citation

  • Carlos Garriga & Aaron Hedlund & Yang Tang & Ping Wang, 2024. "Was China's Housing Boom a Bubble?," Review, Federal Reserve Bank of St. Louis, vol. 106(14), pages 1-15, December.
    • Handle: RePEc:fip:fedlrv:99418
    DOI: 10.20955/r.2024.14
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    More about this item

    Keywords

    China; housing prices; income growth; population growth; land supply;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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