Heterogeneous convergence of regional house prices and the complexity in China*1

The purpose of this research is to analyze the convergence of regional house prices and its complexity in China. In this purpose it used nonlinear time varying factor model. The obtained results have provided evidences for the existence of some degree of segmentation in China’s housing market. By further dynamic analysis of the convergence, we have found that important housing policies from Chinese central government can significantly alter the housing market but with a time lag of 4 to 5 months, and that quite different behaviors exist between the new house market and the second-hand house market in China, which provides the evidence for the complexity of housing market in China. Multiple factors together are the driving forces for the regional house price convergence. And the driving forces differ among three clubs. The basic conclusion provided from the realized research is that the conventional definitions of economic regions may not be appropriate to * Received: 22-09-2015; accepted: 15-12-2015 1 This work was supported by the National Natural Science Foundation of China under Grant No. 71173213; the National Natural Science Foundation of China under Grant No. 71203217; 71403260 and the China Postdoctoral Science Foundation under Grant No. 2013M540129. 2 PhD, School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China, Department of Sociology, University of Chicago, 5801 S Ellis Ave, Chicago, IL 60637, USA. Scientific affiliation: real estate economics. Phone: +86 1 5201 305 859. E-mail: [email protected]. Website: http://www.mscas.ac.cn/. 3 PhD, School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China. Scientific affiliation: real estate economics. Phone: +86 18810404354. E-mail: [email protected]. Website: http://www.mscas.ac.cn/. 4 Assistant Professor, School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China. Scientific affiliation: real estate economics, behavioral finance. Phone: +86 1 3811 580 462. E-mail: [email protected]. Website: http://www.mscas.ac.cn/ Teachers/Professor/243.shtml. (corresponding author). 5 Full Professor, School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China. Scientific affiliation: real estate economics, financial engineering. Phone: +86 1 3521 211 972. E-mail: [email protected]. Website: http://www. mscas.ac.cn/Teachers/Professor/201.shtml. Rui Lin et al. • Heterogeneous convergence of regional house prices and the complexity... 326 Zb. rad. Ekon. fak. Rij. • 2015 • vol. 33 • sv. 2 • 325-348 analyze house price segregation in China. Heterogeneous convergence exists in China’s regional house prices, indicating the complexity of regional house prices in China. And housing policies should be implemented with different focus among the regions. The way of the central government is to make housing policies aiming at different sub-markets of the new house market and the second-hand house market.