Network Analysis of Housing Price Comovements of a Hundred Chinese Cities

Main Points

• The housing prices of Nanjing and Kunshan, Tianjin and Wuhan, Changzhou and Changsha, Changchun and Zibo, and Shantou and Dongying are directly connected. These five pairs of cities form sectoral groups.
• The degree of comovements is generally slightly lower after March 2017 but no persistent drop is discovered. This suggests that there could be supply and demand pattern changes after March 2017 that decrease regional housing price synchronisation.
• Certain cities have potential of being price leaders within an identified group due to their increasing connectivities over time with other cities. These heterogeneities in price dynamics should be useful to policy analysis aiming at housing market stabilisation.
• Analysis of housing price comovements can be helpful in monitoring nationwide and regional overheating in the real estate market and thus risks and bubbles. Excessive comovements identified could serve as warning indicators to policy makers when designing policies to cool down the market from the perspective of multiple locations.