Abstract
Although the heterogeneity of real estate property submarkets has been discussed in a number of studies, little is known about their actual relationship. The purpose of this work is therefore to explore the dynamic interaction among the residential, office and retail markets in China using data from six Chinese mega cities for the period from 2003 to 2014 to create three submarket panels. Through application of the panel co-integration test, it is shown that there is no long-run equilibrium among them, namely, the three property submarkets are not all driven by common fundamentals. More importantly, the panel causality test of the three submarket panel returns reveals that changes in the residential market lead to changes in the commercial market. We may thus conclude that China's authorities should place special emphasis on the residential market in order to restrain today's rising real estate prices.
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