The Empirical Research Of Price Bubble In Housing Market In Fuzhou, Quanzhou And Xiamen

Realty business is the pillar industry of our national economy, therefore, the realestate market have great influence on entire economy system. Since the housingreform in1998, the housing price has got a nationwide rise especially in certain cities,people are shocked by the rise in the very short time. Many scholars believe that thebubble has been in China’s real estate market. The repeated collapses of the housingbubble in the history indicate that we should take precautions against theover-expansion of real estate bubble.Due to the regional differences in the real estate market, the stable housing priceof the whole country can not represent the state of regions. This article select threemajor cities in Fujian Province: Fuzhou, Xiamen, Quanzhou, to examine specificaspects of the cities. Real estates include residential building, office building, andcommercial space, etc., and residential building is the most important part directlyrelated to people’s livelihood, thus this article chooses housing market as the object ofstudy. The Empirical Test using annual data from1999to2012. Firstly, the paperpoints out the definition of the real estate bubble and make theoretical analysis, andafter introducing the basic situations of the three cities the paper selects six indicatorsto measure the real estate market; then establish a state-space model showing themarket supply and demand on the basis of stationary test and co-integration test of allthe variables sequence. Using the Kalman filter estimated coefficients to calculate thebasic price of residential building, the paper calculate the drift rate by comparing thereal price with basic price. Finally, by the testing of drift rate stability to determinewhether there is bubble. If it exists, the bubble-degree is the value of drift rate.The index analysis shows that the housing market in Fuzhou and Xiamen is toohot to have a price bubble while Quanzhou shows a comparative mild situation. Thenthe followed empirical test finds out that housing-market bubble has been already inthose cities respectively in different degree. As with Fuzhou, the bubble hasimmerged since2007and continued expansion with the average of55.4%in2012.The average bubble is31.65%after2007; Quanzhou had a mild bubble during theperiod with the average rate of8.8%; the most serious degree of housing bubbleexists in Xiamen City, with the average reaching103.97%. According to the basicconditions of each city, the paper gives the corresponding policy recommendations.