Relationship between demand and price of house increasing in China - Research Proposal Example

Relationship between Demand and Housing Price Increase of the of the Contents Contents 2 Nature of Problem 3 The Research Question 3Literature Review 3Research Method 4References 5Nature of Problem Housing demand and prices are strongly related to one another and there are number of factors that influence the relationship between the two. There has been extensive study regarding the topic in developed countries but few researchers have focused on the recent increase in prices of house in China.

Presently the rising housing prices in China have loomed the fear of a property bubble burst in the country. The research is undertaken to underline the causes of exponential price increase in China.The Research QuestionWhat are the causal factors of increasing demand and rising house prices in China?Literature ReviewThe research conducted by Glindro, et al. (2008) had focused on the housing market of Asia-Pacific region including China. The results from their research had suggested that the major push in the rising demand of housing in China is coming from the stimulus provided by the government.

The government strongly regulates the prices of the housing market by adopting relevant polices. According to the research conducted by Rothman (2011 cited in Stohldreier, 2012) government in China wants to influence house ownership which explains the high demand of housing in the country. Researchers have pointed out that there are many factors which influence the housing prices. For instance the research conducted by Beltratti and Morana (2010) had pointed out that the main factors which influence the price of housing include variables like private consumption, rate of CPI inflation, interest rates of the economy, stock price and price of oil.

Few researchers have focused on the impacts of monetary policy on the housing market. The results obtained from their study are however mixed and does not show convergence. The research work undertaken by Iacoviello & Minetti (2008) had focused on the impact of credit channel on the housing market. The results from the study had shown that house prices are heavily influenced by changes in the interest changes of the economy. However, this research was conducted in the Western countries namely Finland, Germany, UK and Norway.

Researchers who have focused on the Chinese market specifically have found that rising income of the households is one of the strongest factors that have influenced the demand for housing in China. The past three decades of rapid economic growth in the country have had a huge impact on raising the income of the middle-income households including their disposable income (Chen, Guo and Wu, 2011). Additional factors that have influenced the house of pricing in China include high rate of population growth, rise in savings rate, investment in fixed assets and rising construction activities (Guo & Huang, 2010).

Research Method This research will essentially be a quantitative one that will focus on highlighting the factors that are causing the rise of prices in Chinese real estate market. The researcher plans to use Ordinary Least Squares regression model to identify the significant factors that determines the prices of houses in market. Secondary data is to be collected for the purpose of regression from relevant government websites and works of other researchers. The researcher plans to use time-series data for the past one decade to answer the research question.

ReferencesBeltratti, A. & Morana, C. (2010). International house prices and macroeconomic fluctuations. Journal of Banking & Finance, 34(3), 533-545.Chen, J., Guo, F., and Wu, Y., 2011, One decade of urban housing reform in China: Urban housing price dynamics and the role of migration and urbanization, 1995-2005, Habitat International, 35, 1-8.Glindro, E. T., Subhanij, T., Szeto, J. & Zhu, H. (2008). Determinants of house prices in nine Asia-Pacific economies. Retrieved from http://www.bis.org/publ/bppdf/bispap52.

pdf#page=352.Guo, F. & Huang, Y. S. (2010). Does ‘hot money’ drive China’s real estate and stock markets? International Review of Economics and Finance, 19, 452-466.Iacoviello, M. & Minetti, R. (2008). The credit channel of monetary policy: Evidence from the housing market. Journal of Macroeconomics, 30(1), 69-96.Stohldreier, M. T. (2012). The Determinants of House Prices in Chinese Cities. The Determinants of House Prices in Chinese Cities. Retrieved from http://www.econ.uzh.ch/ipcdp/theses/MA_MarieStohldreier.pdf.