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A measurement model for real estate bubble size based on the panel data analysis: An empirical case study
Fengyun Liu1, Deqiang Liu2, Reza Malekian3
1China University of Mining & Technology, Xuzhou, Jiangsu Province, China.
Plos One
|March 9, 2017
Summary
A new real estate bubble measurement model reveals that while Japan experienced a significant commercial land bubble in the 1980s, recent Chinese housing overvaluation is considerably smaller.
Area of Science:
- Real Estate Economics
- Econometrics
- Comparative Economic Studies
Background:
- Real estate bubbles pose significant economic risks.
- Accurate measurement of bubble size is crucial for policy.
- Existing models have limitations in capturing bubble dynamics.
Purpose of the Study:
- To develop a reliable measurement model for real estate bubble size.
- To analyze and compare real estate bubble sizes in 1980s Japan and recent China.
- To validate the model's reliability against historical economic data.
Main Methods:
- Establishing a measurement model for real estate bubble size based on economic fundamentals.
- Utilizing panel data analysis for regional and national assessments.
- Applying the model to historical data from Japan and contemporary data from China.
Main Results:
- The model accurately reflects the 1980s Japanese real estate market, identifying a larger commercial land price bubble than residential.
- Analysis of recent Chinese housing prices indicates overvaluation is significantly smaller than in 1980s Japan.
- The model's consistency with Japanese data validates its reliability.
Conclusions:
- The developed model offers a reliable method for assessing real estate bubble sizes.
- Recent Chinese housing markets exhibit less overvaluation compared to 1980s Japan.
- The findings challenge widespread concerns about a severe housing bubble in China.
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