Long memory in the housing price indices in China

Résumé

This study examines the time series behaviour of housing prices series for 69 cities in China. The general housing price index, the index of newly constructed buildings and the price index of second hand buildings from 2005:7 to 2010:12 are examined. The univariate fractionally integrated models are employed in order to determine whether shocks to the variables have transitory or permanent effects. Persistence is accepted for the general housing price index and for the newly constructed buildings. In particular Shanghai, Haikou and Sanya have persistent effects signifying that shocks will be permanent and the series will be very persistent. Mean reversion is accepted in most of the second hand building price indices. Based on the suspicion that there are bubbles in some of the series corresponding to the housing market of China, this paper enables us to understand what the possible consequences are for housing market management in the case of an eventual bubble in the China housing market.