Journal of Business & Economic Policy

What Factors Lead to the Large Disparity of Housing Prices between Chinese Cities?
Zhang Xuefeng

Abstract
There is large disparity between China's urban housing prices. The disparity even reaches dozens of times and it is worth to explore the deep level reasons. In this paper, the Chinese 35 cities are divided into four groups according to cluster analysis on housing prices. Combining with panel unit root, panel cointegration, panel Granger causality test results, we analyze the equilibrium relationship between housing prices and household disposable income. Then we use FMOLS model to discuss on the problem of the stability of housing affordability. Analysis showes that: Generally speaking, there was long-term equilibrium relationship between housing prices and household disposable incomes in the 35 cities and housing affordability was stable, but the stability was very weak. There was bilateral causality between housing prices and household incomes. Meanwhile, the problem of housing affordability stability was not a common phenomenon, it only existed in the cities with higher housing prices. Besides income, the city's hardware and software facilities such as food consumption, health care, education, transport and communications are also important reasons for housing price's fluctuation. So the government should take targeted measures to regulate domestic prices and incomes to positive interaction according to local conditions. Simultaneously, the government should also improve the hardware and software facilities in cities with smaller affordability problems to guide the rational flow of housing demand, and ultimately to enhance the stability of affordability. The research perspective and method provided by this paper are universal to some extent.

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