Region-Specific Estimates of the Determinants of Residential Investment

Abstract

This paper adopts a reduced-form equilibrium model to investigate the possible sources of residential investment differentials among 22 provinces, five autonomous regions, and four municipalities in the People’s Republic of China. The model is estimated using panel data from 31 Chinese regions during the period between 2001 and 2006, yielding a total of 186 observations. Empirical results should hopefully shed light on the adjustment mechanism of the Chinese residential-property market. Specifically, this paper suggests that change in population, income, and business confidence are the major determinants that cause residential investment to vary among different regions. The relatively small coefficients of real interest rates and planning regulations suggest that they have significant but modest impacts on residential investment.