Region-specific Estimates of the Determinants of Real Estate Investment in China

This paper utilises a reduced-form equilibrium model to investigate the possible sources of real estate investment differentials among 22 provinces, five autonomous regions and four municipalities of the People’s Republic of China. The model is estimated using panel data from 2001 to 2006, yielding a total of 186 observations. Specifically, empirical results suggest that demographic, economic and planning factors are the major determinants to cause real estate investment to vary among Chinese regions. The relatively small coefficient estimate of real interest rates indicates that it has a significant but modest impact. Based on the coefficient estimates, this paper finally suggests that the Chinese government should focus and work on several policy parameters in order to achieve a more balanced state of real estate investment across Chinese regions. an integral component of the political and economic transition from a socialist to a mar-ket economy. Its development was promoted by a relatively stable political environment and strong economic performance which have ensured continuous economic growth and political stability in turn (Mak et al., 2007). Real estate markets provide an interest-ing field for economic research. On the one hand, the forward businesses of the real estate market include property sales, mortgage, 1