Housing market dynamics in urban China

This paper applies an improved stock-flow model, which identifies the interrelated factors of housing demand and supply, to examine how housing markets operate across the national aggregate level in urban China. Estimating equations for housing prices and new construction are identified and estimated using generalized least squares with cross-section weights. The empirical results suggest that household income is the most significant factor causing housing prices to vary across the national market, while other two variables of user costs and stock/employment have less significant impacts. On the other hand, the positive sign of stock in the estimation of flow equation is against the specification by Dipasquale and Wheaton (1996).