Is urbanization improving real estate investment? A cross-regional study of China
Tie-Ying Liu
School of Economics and Management, Beijing Jiaotong University, Beijing, China
Search for more papers by this authorHsu-Ling Chang
Department of Accounting and Information, Ling Tung University
Search for more papers by this authorCorresponding Author
Chien-Chi Chu
Department of Finance, Shantou University of Business School, Shantou
Research Institute for Guangdong-Taiwan Business Cooperation, Shantou University, Shantou
Correspondence
Chien-Chi Chu, Department of Finance, Shantou University of Business School, No. 243 Da Xue Road, Jin Yuan District, Shantou City, Guangdong 515063, China.
Email: [email protected]
Search for more papers by this authorTie-Ying Liu
School of Economics and Management, Beijing Jiaotong University, Beijing, China
Search for more papers by this authorHsu-Ling Chang
Department of Accounting and Information, Ling Tung University
Search for more papers by this authorCorresponding Author
Chien-Chi Chu
Department of Finance, Shantou University of Business School, Shantou
Research Institute for Guangdong-Taiwan Business Cooperation, Shantou University, Shantou
Correspondence
Chien-Chi Chu, Department of Finance, Shantou University of Business School, No. 243 Da Xue Road, Jin Yuan District, Shantou City, Guangdong 515063, China.
Email: [email protected]
Search for more papers by this authorAbstract
This paper applies bootstrap panel Granger causality to test the relationship between urbanization and real estate investment from 1990 to 2014 for 29 provinces in China. We argue that the patterns of interaction between urbanization and investment in real estate vary across regions. The results show that urbanization does Granger-cause investment in real estate, primarily in the central and northeastern regions of China, while urbanization does not Granger-cause investment in real estate in the eastern and western regions, except for four provinces. Most regions do not have a Granger-causality relationship from real estate investment to urbanization; the exceptions are Henan and Hei Longjiang provinces. Our results only support one theory on the relationship between urbanization and the real estate market for one-third of the provinces. Thus, urbanization can improve real estate investment by increasing the demand for housing as a result of population agglomeration, but urbanization does not depend on real estate investment in China.
REFERENCES
- Ahuja, A., Cheung, L., Han, G., Porter, N., & Zhang, W. (2010). Are house prices rising too fast in China? (IMF Working Paper No. 10/274). Washington, DC: International Monetary Fund.
- Alonso, W. (1964). The historic and the structural theories of urban form: Their implications for urban renewal. Land Economics, 40(2), 227–231.
- Breusch, T., & Pagan, A. (1980). The LM test and its application to model specification in econometrics. Review of Economic Studies, 47(1), 239–254.
- Charney, I. (2001). Three dimensions of capital switching within the real estate sector: A Canadian case study. International Journal of Urban and Regional Research, 25(4), 740–758.
- Chen, J., Guo, F., & Wu, Y. (2011a). One decade of urban housing reform in China: Urban housing price dynamics and the role of migration and urbanization, 1995–2005. Habitat International, 35(1), 1–8.
- Chen, J., Guo, F., & Wu, Y. (2011b). Chinese urbanization and urban housing growth since the mid-1990s. Journal of Housing and the Built Environment, 26(2), 219–232.
10.1007/s10901-011-9214-0 Google Scholar
- Chen, L. Q. (2005). The dynamic mechanism of urbanization development. Modern Economic Research, 2005(1), 10–16.
- Dasgupta, B., Lall, S. V., & Lozano-Gracia, N. (2014). Urbanization and housing investment (World Bank Policy Research Working Paper No. 7110). Washington, DC: World Bank.
- Deng, Y., McMillen, D., & Sing, T. F. (2012). Private residential price indices in Singapore: A matching approach. Regional Science and Urban Economics, 42(3), 485–494.
- Du, J., Yang, Y., Li, D., & Zuo, J. (2017). Do investment and improvement demand outweigh basic consumption demand in housing market? Evidence from small cities in Jiangsu, China. Habitat International, 66, 24–31.
10.1016/j.habitatint.2017.05.006 Google Scholar
- Feng, D. L. (2013). With the mess: An empirical study on effect of real estate regulation policy. Reform of Economic System, 2013(4), 34–37.
- Hui, E. C., & Yue, S. (2006). Housing price bubbles in Hong Kong, Beijing and Shanghai: A comparative study. The Journal of Real Estate Finance and Economics, 33(4), 299–327.
- Jian, X. H., & Huang, K. (2010). Empirical analysis and forecast of the level and speed of urbanization in China. Economic Research Journal, 2010(3), 28–39.
- Jønsson, J. B., & Bryceson, D. F. (2017). Beyond the artisanal mining site: Migration, housing capital accumulation and indirect urbanization in East Africa. Journal of Eastern African Studies, 11(1), 3–23.
10.1080/17531055.2017.1287245 Google Scholar
- Kónya, L. (2006). Exports and growth: Granger causality analysis on OECD countries with a panel data approach. Economic Modelling, 23(6), 978–992.
- Lieser, K., & Peter Groh, A. (2011). The attractiveness of 66 countries for institutional real estate investments. Journal of Real Estate Portfolio Management, 17(3), 191–211.
- Liu, J. J., Kuang, S. C., Yang, Q., & Liu, C. X. (2011). The research on coordinated development of urbanization and the real estate industry. Journal of Changsha University of Science & Technology, 26(4), 49–54.
- Liu, T. Y., Chang, H. L., Su, C. W., & Jiang, X. Z. (2016). China's housing bubble burst? Economics of Transition, 24(2), 361–389.
- Liu, T. Y., Su, C. W., & Jiang, X. Z. (2015). Is economic growth improving urbanisation? A cross-regional study of china. Urban Studies, 52(10), 1883–1898.
- Liu, Y. C. (2004). The effect of the trend of population change on the real estate development during the course of urbanization in China. Population Journal, 145(3), 45–48.
- Liu, Z. P. (2014). The empirical on the relationship between the level of urbanization and real estate investment. 2014(10), 186–191.
- Mark, N. C., Ogaki, M., & Sul, D. (2005). Dynamic seemingly unrelated cointegrating regession. Review of Economic Studies, 72(3), 797–820.
- Monkkonen, P. (2013). Urban land-use regulations and housing markets in developing countries: Evidence from Indonesia on the importance of enforcement. Land Use Policy, 34, 255–264.
- Muth, R. (1969). Cities and housing. Chicago: University of Chicago Press.
- Nazlioglu, S., Lebe, F., & Kayhan, S. (2011). Nuclear energy consumption and economic growth in OECD countries: Cross-sectionally dependent heterogeneous panel causality analysis. Energy Policy, 39(10), 6615–6621.
- Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels (Cambridge Working Papers in Economics No. 0435). Cambridge, UK: Faculty of Economics, University of Cambridge.
10.2139/ssrn.572504 Google Scholar
- Pesaran, M. H., Ullah, A., & Yamagata, T. (2008). A bias-adjusted LM test of error cross-section independence. Econometrics Journal, 11(1), 105–127.
- Pesaran, M. H., & Yamagata, T. (2008). Testing slope homogeneity in large panels. Journal of Econometrics, 142(1), 50–93.
- Ren, J. J. (2005). City type bubble is the characteristics of the real estate in China. Economic Information Daily, February 19.
- Saiz, A. (2007). Immigration and housing rents in American cities. Journal of Urban Economics, 61(2), 345–371.
- Sakay, C., Sanoni, P., & Deng, T. H. (2011). Rural to urban squatter settlements: The micro model of generational self-help housing in Lima-Peru. Procedia Engineering, 21, 473–480.
- Shaw, V. N. (1997). Urban housing reform in China. Habitat International, 21(2), 199–212.
- Swyngedouw, E., Moulaert, F., & Rodriguez, A. (2002). Neoliberal urbanization in Europe: large-scale urban development projects and the new urban policy. Antipode, 34(3), 542–577.
- Tang, B. S., & Yiu, C. Y. (2010). Space and scale: A study of development intensity and housing price in Hong Kong. Landscape and Urban Planning, 96(3), 172–182.
- Tang, K., & Xu, X. (2017). The effectiveness analysis of China's real-estate regulatory policy. Journal of Chinese Economics, 5(1), 99–103.
- Tian, L., Wang, H. H., & Chen, Y. J. (2010). Spatial externalities in China regional economic growth. China Economic Review, 21, 20–31.
- Tobler, W. R. A. (1970). Computer movie simulating urban growth in the Detroit region [J]. Economic Geography, 46(1), 234–240.
- Wassmer, R. W., & Baass, M. C. (2006). Does a more centralized urban form raise housing prices? Journal of Policy Analysis and Management, 25(2), 439–462.
- Wu, F. (2001). China's recent urban development in the process of land and housing marketisation and economic globalisation. Habitat International, 25(3), 273–289.
- Wu, J., Deng, Y., & Liu, H. (2014). House price index construction in the nascent housing market: The case of China. The Journal of Real Estate Finance and Economics, 48(3), 522–545.
- Ye, L., & Wu, A. M. (2014). Urbanization, land development, and land financing: Evidence from Chinese cities. Journal of Urban Affairs, 36(s1), 354–368.
- Yu, H. (2011). Size and characteristic of housing bubbles in China's major cities: 1999–2010. China & World Economy, 19(6), 56–75.
- Zhang, C. Y., Ding, Z. Y., & Duan, F. (2014). Research on urbanization, the real estate market maturity and investment prospects based on an empirical analysis of the 286 regional cities in China. Reform of Economic System, 2014(6), 62–66.
- Zhang, H. Q., Wang, L. D., & Zhang, Q. (2016). The impact of urbanization on the real estate investment. Journal of Fujian Forum, 2014(4), 175–180.
- Zhang, L. X., & Qin, J. W. (2014). Urbanization and regional differences of investment in real estate development: Evidences based on the dynamic panel data model. Contemporary Finance & Economics, 360(11), 103–110.
- Zhao, P. F. (2010). Innovation in the shifting model of rural labor force in the urbanization of Henan province. Journal of Henan University of Science & Technology, 6(2), 10–13.
