The measurement of financial support for real estate and house price bubbles and their dynamic relationship: An empirical study based on 31 major cities in China

Abstract

<abstract> <p>In recent years, China's real estate prices have continued to rise, preventing the bursting of the house price bubble, and the various risks it triggers has become an important issue that governments at all levels have to face. In this paper, the backward sup ADF (BSADF) method was used to dynamically portray the evolution of real estate price bubbles in 31 large and medium-sized cities in China over a period of 11 years, from 2013 to 2021, and the dynamic relationship between the degree of financial support for real estate (hereinafter referred to as financial support) and house price bubbles in cities was investigated by employing a panel vector autoregressive (PVAR) model with panel data. The results showed that: Multiple cyclical bubbles significantly existed in the real estate markets of the cities during the study period, and in general, house price bubbles appeared earlier in the more economically developed regions than in the less economically developed regions and have spread to the less economically developed regions. Financial support contributed to house price bubbles, supporting the theory of excessive financial support. Furthermore, the results of the sub-sample showed that financial support contributed most strongly to house price bubbles in cities in the northern region.</p> </abstract>