Housing networks in urban China: A panel VAR model with Bayesian stochastic search

• Published in: Cities 2023-09, Vol.140, p.104400, Article 104400
• Main Authors: Duan, Kun, Lan, Feng, Zhao, Yanqi, Huang, Yingying
• Format: Article
• Language: English
• Subjects: Bayesian stochastic search; China housing market; Housing network; Information spillover; Panel VAR
• ISSN: 0264-2751
• DOI: 10.1016/j.cities.2023.104400

This paper analyzes housing networks in China established through the inter-city information spillover. Unlike conventional methods that either fail to identify the city-level linkage or impose arbitrary restrictions, we investigate both the direction and magnitude of cross-city housing spillover in a data-driven manner by employing a panel VAR framework with Bayesian stochastic search. Through this, significance of the pair-linkages is examined from both perspectives of return and shock with insignificant ones being detected. Using a monthly dataset of housing prices covering 70 major China's cities over 2005–2021, our results confirm the presence of positive housing spillover that 11.68 % and 12.92 % of the total city-paired linkages are found to exist in terms of return and shock, respectively. With a particular focus on China's key urban agglomerations, housing spillovers exist not only across city-tiers in forms of ‘top-down’ and ‘bottom-up’ but also within the same tier in a ‘peer learning’ pattern, and the spillover magnitude of the latter is shown to be greater than that of the former. Despite the above common pattern, housing networks also demonstrate heterogeneous features across city clusters. Additional analyses reassure robustness of our findings that possess implications for clear comprehension of regional housing price dynamics. •Housing networks in urban China are drawn in a data-driven manner by a Bayesian research framework.•Direction and size of the city-paired linkages are studied from both data in return and volatility.•11.68 % and 12.92 % of the total linkages are found to exist among the 70 major cities in China.•Linkages emerge not only across city tiers in top-down and bottom-up, but also within the same tier.•Despite common patterns, housing networks also show unique features in different city clusters.