Pursuing the Sustainability of Real Estate Market: The Case of Chinese Land Resources Diversification

Abstract

Numerous studies have focused on the ripple effect in housing markets; however, these studies often fail to grasp the critical role of commercial real estate land use when forming a real estate portfolio. We argue that spreading an investment across various land-use assets—namely, diversification—may be effective in stabilizing and balancing China’s housing market through the introduction of the ripple effect. In six Chinese mega-cities, the cointegration system is initially used to prove the existence of ripple effects. A causality test can then identify the source cities: Beijing and Chongqing in the residential market, and Shenzhen and Chongqing in the commercial market. Finally, the authorities should enforce the differentiated measures by “depressing the housing market while encouraging the commercial market” in the respective target cities; this approach could efficiently ripple out to other cities. It is believed that the policy of land resources diversification can enable the Chinese real estate market to achieve more sustainable development.