Chinese regional bubbles in metropolitan housing markets: Evidence from Shanghai

Using the Panel Data of housing prices and fundamental of Shanghai for 1990-2003, the paper decomposes housing prices into fundamentals and non-fundamentals components and investigates the city-level relationships of housing prices and fundamentals and nonfundamentals in Shanghai whether there is a speculative bubble in housing prices. Our main findings suggest that Housing prices fluctuation is not influenced by real construction cost growth, income growth and deviation from equilibrium in Shanghai, but housing prices fluctuation is influenced by lagged real house price appreciation significantly, and there may be a speculative bubble in the housing prices of Shanghai and it tends to expand.