Analysis On City Heterogeneity Towards The Fluctuation Of Real Estate Price

Real estate is the major industry to promote the development of national economy. Changes of real estate have deep impact on the development of Chinese economy. Housing prices of some cities rising fast in recent years, and the share of GDP going to real estate industry is increasing year by year, from which we can learn that excessive development characteristics of real estate has become obviously and rising house price has become a serious social and economic issue. The government makes measures on the real estate market and increase the regulation of real estate to suppress the house prices rising rapidly, on the other hand, the government fears any real estate bubble burst and then causing the problem of system risk, harming the economy in China. However, because different city at the different stage of development and the housing price gap between different cities is significant. The housing prices of China’s eastern coastal city is about five times the housing prices of China’s Middle Western city, so the heterogeneity of urban housing price is obviously. Therefore, the government should take various macro-control policies to deal with the difference between real estate markets and make structural adjustment on the real estate market in line with the local condition which will promote the development of real estate market in different cities.The paper mainly analyzes the fluctuating price of real estate and its heterogeneity in different cities. Adopting two elements including home sales prices and average personal income and the panel data of35cities, then applying K-means clustering method to divide these cities into four parts, that is cities of high housing price and high income level, cities of high housing price and middle income level, cities of low housing prices and middle income level and cities of low housing prices and middle income level. The paper also employments equations of housing prices which were proposed by Muellbauer and Murphy in1997and choosing five representative variables including home sales prices, the per capital disposable income of urban residents, RMB outstanding loans, lending rate of3years to5years and the per capital house sales to build panel data models of constant parameter. Estimating these models and analyzing the relationship between housing prices and macroeconomic variables. Furthermore, the dissertation also using these five key variables design two panel Vector Autoregression models for the overall sample and the separated samples. Finally, the impulse response function and parameters of the model could be estimated, then making an analysis of the dynamic relationship between housing prices and macroeconomic variables through variance decomposition.The empirical result of two models suggest that there is a positive feedback which is mutual suppression but mutual promote and macroeconomic variables play a key role in the volatility of real estate prices caused by macroeconomic variables, for another, there is big difference in the effect caused by the same macroeconomic factors and the interpreting ability of different macroeconomic factors, in addition, there is remarkable heterogeneity of cities in volatility of real estate prices. So the government should consider the heterogeneity of real estate markets when formulating policies on real estate market regulation and applying relevant polices in lined with the local conditions to take structure adjustments on real estate market.