Empirical Analysis on the Factors of Housing Investment Fluctuation in China

In order to study the causes of Chinese housing investment fluctuation in, recent years, this paper explores the housing investment model based on the theory of neoclassic economics, which shows that housing investment is related to the expectations on housing price, investment, production level and cost elements. Furthermore, this paper analyzes the factors that affect housing investment fluctuation in China, using three different estimation methods (i.e. least square method (OLS), two-stage least square method (2SLS) and generalized method of moments (GMM)). The results are as follows: (1) The elasticity of housing price is greater than that of costs which demonstrate housing investment is overheated in China partially because of large profitable space in real estate market. (2) The impact of land space developed on housing investment is positive this year which illustrates that income effect is greater than cost effect. (3) Real interest rate has a great impact on it, therefore, it is proved that it is effective for the government to control real estate market by means of monetary policy on the increase of interest rate. Furthermore, we draw a conclusion that a series of policies will effectively control the growth rate of housing investment and restrain real estate overheated investment.