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- Title
Shadow Banking and the Property Market in China.
- Authors
Rose Neng Lai; Van Order, Robert
- Abstract
This paper studies the evolution of property values and the connections between shadow banking and property markets in China. We use Pooled Mean Group estimation to analyze Chinese house prices in 65 cities from 2007-2016, define the "fundamentals" of housing prices with the Gordon dividend discount model, and use lagged rents, prices, real and nominal interest rates, and shadow banking activity as short term explanatory factors. We find that the cities tend to share long run fundamentals and adjust relatively quickly to deviations from the fundamentals. We do not find bubbles; rather houses are like growth stocks with house prices rapidly chasing growing rents. More importantly, we find that house prices increase more quickly with the availability of shadow banking funds, which have grown rapidly.
- Subjects
CHINA; SHADOW banking system; HOME prices; REAL property; BANK marketing; GROWTH stocks
- Publication
International Real Estate Review, 2019, Vol 22, Issue 3, p361
- ISSN
1029-6131
- Publication type
Article