Financing housing and house prices in China

Abstract

Purpose This paper aims to examine the evolution of house prices in China and especially the effects of different financing channels on China’s house prices. Design/methodology/approach The author use the own theoretical framework and proceed to test the testable hypotheses by using the autoregressive distributed lag bounds test approach for cointegration analysis and the unrestricted error correction model. Quarterly time series data from Q1 2002 to Q2 2016 are used. Findings The results suggest that in the short run, bank loans to real estate development and scale of shadow banking have significant positive effects on house prices. In the long run, the scale of shadow banking and disposable income affects house prices positively and significantly. Originality/value This study provides more insights into how and to the extent different financing channels affect China’s house prices, particularly the impact of shadow banking on the house prices.