The Analysis of the Housing Markets in Beijing and Washington, 2005-2014

Xintong Yao

doi:10.4236/me.2015.610108

Abstract

Since the economic reform of the late 1970s, China has achieved a magnificent economic growth. China’s socialist market economy has become the world’s second largest economy by nominal GDP, reaching 10,380 billion dollars and holding a 13.43 percent share of global GDP. The dramatic growth of economy also has boosted the development of Chinese housing market. But the question remains: Is the Chinese real estate market developing in a positive way? This paper first compares the housing prices in Washington and Beijing using hypothesis test for population means and linear regression model. It is found that despite China’s low housing price in early years, the average housing prices are almost the same in Beijing and Washington area. The most reasonable proposal is that the personal income in Beijing is higher. However, the data and the line chart illustrate that the opposite is actually true. Therefore, in order to further explore the reasons behind the high housing prices in Beijing, the paper then statistically analyzes a series of factors, including per capita income, limited land resources, city functions, unbalanced regional development, the influence of cultural traditions, the government policies, the structure of housing supply, and the investment demand. The last part of the paper points out the problems of the Chinese housing market by looking at the housing price to income ratio and the economic growth trend. The result shows that Chinese housing price has far exceeded common people’s affordability, which has the potential to cause social instability.

Highlights

America and China are the world’s largest and second largest economies respectively
When we are gathering the data of housing prices of Washington D.C., one thing should be taken into consideration: most of the people who work in Washington are commuters from the surrounding Maryland, Virginia, and West Virginia
The graph demonstrates that the wages have risen in China, China still has a long way to go before its per capita income catches up with that of the U.S This result disapproves the proposal mentioned above that it is the high income in Beijing that results in its expensive housing price

Summary

Introduction

America and China are the world’s largest and second largest economies respectively. America has been theHow to cite this paper: Yao, X.T. (2015) The Analysis of the Housing Markets in Beijing and Washington, 2005-2014. America and China are the world’s largest and second largest economies respectively. Yao greatest superpower for the past hundred years, with a 22.53 percent share of global GDP in nominal terms in 2014, whereas China is an emerging economy because of rapid growth and industrialization and has just embarked on the path of strength and prosperity [1]. Thanks to Deng Xiaoping’s economic reform in 1978, China has transformed from a central-orientated economy to the current market-oriented economy and has become one of the fastest-developing countries in the world. Even though the GDP of America is more than 7000 billion dollars than that of China, many economists have predicted that China’s economy will overtake America’s in less than two decades [3] [4]

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