Study on the Dynamic Relationship between Housing Price and Land Price in Shenzhen Based on VAR Model

Abstract

Irrational growth in the real estate market of first-tier cities once again triggered a discussion on the relationship between housing price and land price. This paper uses the quarterly data of housing price and land price of Shenzhen from 2003 to 2015 to establish VAR model which is based on unit root test, co-integration test and analysis of Error Correction Model, and then it makes an empirical study on the relationship between housing price and land price of Shenzhen through analysis frame of impulse response function and variance decomposition. The research shows that there is a long-term equilibrium relationship between housing price and land price in Shenzhen: in the long term, housing price determines land price, while in the short term, they interact with each other; Shenzhen’ housing price and land price are affected by themselves very much, its real estate market’s financial attribute is becoming more and more prominent. Finally, this paper puts forward some corresponding policy recommendations to stabilize the real estate market based on the results of this study.