Specification of housing bubbles based on markov switching mechanism: A caseof Beijing

Abstract

Applying Markov switching mechanism to housing price model and ADF test, this paper determines the phases of housing bubble in Beijing from 1998 to 2010. The conclusions are as follows. After 2005, Beijing's housing market entered the stage of bubble accumulation. There are serious bubbles in 2007, 2009 and 2010. Disposable income and price expectation have significantly positive influences on housing price. Deposit and mortgage rates are of stationary features in the MS-ADF test, and the fluctuation of housing price is mainly caused by changes of income. The non-stationary supply of land strengthens the expectation of increase of housing price, and credit growth and long-term low interest rates contribute to the expansion of housing bubbles. © 2011 Springer-Verlag Berlin Heidelberg.