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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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    References listed on IDEAS

    as
    1. Piazzesi, M. & Schneider, M., 2016. "Housing and Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1547-1640, Elsevier.
    2. Hanming Fang & Quanlin Gu & Wei Xiong & Li-An Zhou, 2016. "Demystifying the Chinese Housing Boom," NBER Macroeconomics Annual, University of Chicago Press, vol. 30(1), pages 105-166.
    3. Todaro, Michael P, 1969. "A Model for Labor Migration and Urban Unemployment in Less Developed Countries," American Economic Review, American Economic Association, vol. 59(1), pages 138-148, March.
    4. Kaiji Chen & Yi Wen, 2017. "The Great Housing Boom of China," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(2), pages 73-114, April.
    5. Wu, Jing & Gyourko, Joseph & Deng, Yongheng, 2016. "Evaluating the risk of Chinese housing markets: What we know and what we need to know," China Economic Review, Elsevier, vol. 39(C), pages 91-114.
    6. Carlos Garriga & Aaron Hedlund, 2020. "Mortgage Debt, Consumption, and Illiquid Housing Markets in the Great Recession," American Economic Review, American Economic Association, vol. 110(6), pages 1603-1634, June.
    7. Robert E. Lucas, Jr., 2004. "Life Earnings and Rural-Urban Migration," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 29-59, February.
    8. Carlos Garriga & Rodolfo Manuelli & Adrian Peralta-Alva, 2019. "A Macroeconomic Model of Price Swings in the Housing Market," American Economic Review, American Economic Association, vol. 109(6), pages 2036-2072, June.
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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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