Many scholars did positive researches about the quantity disequilibrium of
real estate market effective supply and demand in China. Ji
(2005) stated hotter real estate development caused the disequilibrium of
supply exceeding demand, investment promoted the development of real estate
industry with high speed. There was insufficiency of effective demand with large
latent demand which caused a large number of vacancy. Luo
and Wang (2006) asserted that it was comparatively serious about unbalanced
issue of effective supply and demand on commercial residential building in a
certain period by analyzing the relative data of real estate market in China
during 1987-2004. Zhou (2005) empirically analyzed
the relationship between price fluctuation and speculation in 14 cities in China
which showed disposable income had no obvious impact on the price of real estate.
While speculation was the major impetus for the rising of the price of real
estate which deviated long-run equilibrium value greatly. It appeared irrational
exuberance in the market Li and Zheng (2001) studied
the contradictory phenomena of excess supply and demand in the real estate market,
thought it led to the unidentifiable situation of price information which caused
the disequilibrium. Du (2010) proposed that here was
disequilibrium in the real estate market which was against economic theory.
Li (2010) pointed out it need to combine two way to
limit the high price, namely containing speculation by implementing new policy
on mortgage and increasing the supply of commercial residential building.
In the study, makes use of relevant statistics data of real estate from 1990-2009
in Jiangsu province with disequilibrium theory. combine with ADF (Augmented
Dickey-Fuller) test and PP (Phillips-Perron) test analyze the data. The results
reference for the government macroeconomic regulation.
Basic assumption: There are Marshalls Partial equilibrium theory
and Walras General equilibrium theory which produce extensive effects
on economy. Disequilibrium theory applied in the study is relative to Walras,
whose assumption as follows, market is perfect. Market competition is sufficient.
Market information is full and smooth (Zhang and Li, 2008).
Sensitive price is the only pilot light. Disequilibrium is temporary while equilibrium
is the normality in the market. However, equilibrium theory asserts there is
no perfect and fully competitive market, if information circulation can not
go fully, it does not exist the equilibrium state under the condition of sensitive
price adjustment. A certain monopolization exists in the real estate market
which can not reach full competition because of capital and technology. Information
can not be circulated fully among developer, investor and consumer which necessarily
lead to inconsistency of supply and demand. Price can not be adjusted in time
in the short term. Hence, disequilibrium theory truly reflect the operation
law of real estate market.
Principle of the minimum model: Commodity market transaction in the state
of disequilibrium can generally state by equations as follows:
Dt shows real estate demand quantity in the period of t. St
shows real estate supply quantity in the period of t. Vector Xt,
Xt are various exogenesis variables which can influence the
supply and demand. Xt and Xt are parameters estimation.
ut and ut are stochastic error at random and satisfy
the hypothesis that both mean are zero and sequence is not relative. Qt
shows the real deal quantity in the real estate. Kornai put forward that macro
economy trading volume should be less than the minimum of supply and demand
in the process of studying East European , namely short edge theory. Therefore,
quantity demanded and supplied usually are not equal in the real deal market.
According to short edge theory, the shortage of macro quantity is common, trading
volume fits trading equation (Wang and Deng, 1997):
Qt = min(Dt, St)
Disequilibrium model: The principle of the minimum model is the basis
of disequilibrium model, but it doesnt
reflect the true condition of real deal. Due to imperfection and insufficiency
of information smoothness in the real estate market, deficiency and overabundance
exist simultaneously. The principle of the minimum model is not suitable because
of disequilibrium of macro economy and structure. After polymerizing of real
estate market, trade volume is usually less than any value of demanding and
supplying. To better grasp the market essence of disequilibrium, many scholars
at home and abroad post market segmentation and consider polymerizing effects.
They put forward hyperbola polymerization equation. Recently it is relatively
common to adapt CES production function and hyperbola polymerization equation
to study disequilibrium in the real estate.
According to Kornais short
edge theory, Burkett thought that among lots of micro-market there always exist
different degree excess supply or excess demand. When it exists excess supply
in the micro-market, supply quantity (St-Qt)/St
will decline obviously if increasing commodity demand. Excess demand quantity
(Dt-Qt)/Dt will increase comparatively. When
demand continue to increase, excess demand will appear in the market and demand
will be influenced (Dt-Qt)/Dt. The relationship
between (St-Qt)/St and (Dt-Qt)/Dt
is almost equal to rectangular hyperbola:
r2 = [(Dt-Qt)/Dt]*[(St-Qt)/St]
where, r shows the polymerization degree of micro-market. The trading volume
can be gotten by solving the above equation:
By it find since r>0 is economic normality, so
The above sign is the identical to the principle of the minimum models.
Generally speaking, the real estate market in country is in the state of deficiency
and overabundance. Therefore, the study will adapt hyperbola model to study
disequilibrium of real estate market in JiangShu province (Qi
and Li, 2002).
It mainly includes three parts. According to disequilibrium theory, setting
effective supply and demand model of real estate market; selecting and arranging
the data; parameter estimation which is the key point and also difficult point.
Setting effective supply and demand model of real estate market in Jiangsu
province: According to supply and demand factors affecting real estate in
Jiangsu province and utilized statistical data, the study selects per capita
disposable income of urban households. The average price of commercial housing
sales, city population proportion and the macro-economic policy as exogenous
variables of demand equation of real estate. Select the average sale price of
real estate, completing volume of developing of real estate, the level of national
income, political and economical factors as exogenous variables of supply equation
of real estate. According to the conception of effective aggregate supply, when
the investment of residential sales and price is zero, developers have no desire
to supply, namely, effective supply quantity is zero. Therefore, the constant
terms of effective supply equation is zero. According to disequilibrium theory,
disequilibrium model of effective supply and demand of real estate market in
Jiangsu province is as follows (Riddel, 2004).
Effective demand equation of real estate market in Jiangsu province:
Effective supply equation of real estate market in Jiangsu province:
Trading volume equation:
where, Dt shows demand quantity of real estate market by annual
sales area of commercial housing; St shows supply quantity of real
estate market by annual completion area of commercial housing; X1 shows
average sales price of real estate; X2 shows per capital disposable
income of urban households; X3 shows city population proportion;
X4 shows gross domestic product; X5 shows completion volume
of investing of real estate; X6 shows above five-year benchmark lending
rates of financial institution; udt and vd show, respectively
total factors affecting effective demand and supply of real estate except all
the variables mentioned above; α1, α2, α3,
α4 and β1, β2, β3
are the parameters estimation in the model; α0 is the constant
term; Qt shows forecasting the market transaction volume; r shows
market friction coefficient.
Selecting and arranging of data: The study studies the disequilibrium
of real estate market in Jiangsu province by selecting relative data of real
estate market in Jiangsu province from 1990-2009. All the data are from statistical
year of Jiangsu, the sales price of real estate derive from results that sales
areas of real estate divided by sales volume of real estate. To eliminate the
effects of price level, all are divided by urban consumer price index. (average
sales price of real estate, investment volume of real estate, gross domestic
product and per capita disposable income of urban households). The data arranged
is shown in Table 1.
Real estate supply-demand quantity equilibrium estimation: Equilibrium estimation
means supposed market is in the state of equilibrium. (in the state of clearing
Qt = Dt = St. Get the initial value of parameter
on trading volume equation by using generalized least squares estimation on
effective demand equation and effective supply equation.
Variable stationarity checking-ADF checking: If time series adopted
in the process of modeling is not stationary, it probably leads to spurious
regression. Therefore, to ensure the regression result, it will carry out test
on the stationarity of sample data by applying extending Dickey-Fuller test
According to ADF test principal, first carry out stationary test to original
sequence and difference sequence. Observe the scatter diagram of time series
to decide whether original sequence vary at random and fluctuation trend vary
with time and whether adding intercept and trend in the test. At the same time,
ensure lag by AIC conduct.
Test results show original sequence of sample Dt, St, X1, X2, X3, X4, X5 and
X6 can not refuse the original hypothesis. Namely, existing unit root is time
series of unstationarity.
Cointegration test: According to unit root test result and cointegration
theory, use cointegration relationship of different variables of E-G test method
(1-2), first use Eviews6.0 software to regress. Regression results show in (4-5),
respectively, then carry out the unit root test of regression equation residual
rdt and rdt,
the results show in the Table 2 and 3.
|| History datas about estate market in Jiangsu Province from
1990 to 2009 year
|| Unit root test results of Eq. 1 residuals
|| Unit root test results of Eq. 1 residuals
ADF test is Augmented Dickey-Fuller test, PP test is Phillips-Perron test.
According to above charts, it can conclude that residual udt and
rdt is stable in the level of 1%,which shows that co-integration
relation exists among each variable. Model as follow, respectively (Effective
demand equation on the demand of real estate in Jiangsu province):
D = -8.7354+2.0420X1+1.3217X2+1.4297X3-1.7613
(2.0352)(0.4509) (0.9973) (0.2818)(1.1088)(4)
t = (-4.2921) (4.5284) (1.3251) (5.0723)(-1.5884)
R2 = 0.9939 R2 = 0.9923 F = 611.9248 DW = 2.2624
Results show by Durbin-Watson test (DW test) because sample volume n is equal
to 20 which prove the number of variable is 4 (k = 4),when α = 0.05, dL
= 0.90, dU = 1.83, it can get the result:
dU<DW = 2.2624<4-dU
Judged by above results, the model does not exist first order positive autocorrelation
coefficient. and determinants of coefficient is 0.99. Goodness of Fit is relatively
high on the whole, F-value is very high which explains the overall explanatory
power of explanatory variable is excellent and t-value of x1, x3 all manage
to test in the level of 95% t-value
of x2, x4 manage to test in the level of 80%. Therefore, it can conclude the
value of parameter estimation is the initial parameter of trading volume temporarily.
Effective supply equation of real estate in Jiangsu province can be set up
From the viewpoint of parameter estimation, supply sample determinants of coefficient
is 0.986,Goodness of Fit is high. F-value is 523.578, the whole estimation of
model is good. T-value of all explanatory variable manage to test in the level
of 99%. DW value shows the model does not exist first order autocorrelation
coefficient. Therefore, it can conclude the value of parameter estimation is
the initial parameter of trading volume temporarily.
Analysis of parameter estimation results: Conclusion can be gotten from
parameter estimation results. (1) There is positive correlation among price
of commercial housing, per capital disposable income of urban households, city
population proportion and efficient demand of real estate market in Jiangsu
province. There is negative correlation to gross domestic product. It explains
that it strengthens the effective demand to commercial housing to some extent
as average disposable income increase. which fit for economic demand theory.
It accelerates the development of urbanization and also promote the effective
demand of real estate market. While the growth of national economy does not
obviously improve effective demand of real estate market, (2) The improvement
of average price of commercial housing can promote the effective supply and
demand quantity of real estate in Jiangsu province. Impact on effective supply
quantity is apparent, since the unchangeable thesis to developer is to pursue
profit and enlarge market. However, impact on effective demand seems to be against
demand theorem which fully manifest large investment and speculation on real
estate market. Namely sheep-flock effect in the real estate market and (3) Negative
correction between effective supple and demand of real estate market and loan
interest rate of financial institution shows that increase of loan interest
rate pose pressure on effective supply of real estate market and it is feasible
to regulate real estate market by interest rate.
DISEQUILIBRIUM DEGREE ESTIMATION
Effective supply and demand quantity of real estate in Jiangsu province
and disequilibrium degree estimation: According to the above model, logarithm
value of effective demand and supply quantity of real estate in Jiangsu province
in each year can be gotten with explanatory variable. According to short edge
rule, define DEM and SUP, respectively as effective demand quantity and effective
supply quantity of real estate market in Jiangsu Province in a certain year.
Q is stimulated trade volume, disequilibrium degree of housing market effective
supply and demand is Z shows:
t means year. The result is seen in Table 4.
|| Results on effective demand and supply and disequilibrium
Comparing effective demand and supply quantity of real estate in Jiangsu province
from 1999-2009 with real trading volume, chart 15 can be gotten. According to
the chart, can judge whether it exists irrational consumption.
Results analysis: The first stage, from 1990-1993. the 18th National
congress of the CPC was held in 1992,which quickened reform of political system,
promoted economical construction and real estate market. Effective supply volume
exceed effective demand volume. Hence, disequilibrium index descended quickly
and reached its lowest point in 1993 which led to the phenomena of supply exceeding
The second stage, from 1994-1997. Government carried out the policy of macroscopic
control pointing at inflation by overhead economy in the second half year in
1993. The key point was to adjust real estate industry. By releasing relative
regulation, real estate industry was hit deeply. Supply in the market gradually
decreased. Disequilibrium index in this period was positive value and effective
supply quantity is more than effective demand quantity in the market.
The third stage, from 1998-1999. Export and consumption growth in china were
influenced by Asia financial crisis in 1997. Fix assets investment became major
factor to fuel economical growth. To better promote market economy, guide the
development of real estate industry reasonably and effectively, government stopped
welfare-oriented public housing allocation system which caused more investment
in real estate, increased effective supply quantity quickly. Therefore, disequilibrium
degree descended on end which reached its peak in 1999.
The fourth stage, from 2000 to now. Entering the new era, with high households
savings, effective demand increasing in real estate market, national economy
turned into buyers market from
sellers market and shortage
of effective demand had relieved. Disequilibrium degree in the period was still
negative value, but trend was comparatively smooth which showed that it became
mature and rational comparing with previous volatility. It tended to balance
in the 1997. In 2008 economical recession all over the world was triggered by
international financial crisis. National economy situation experienced a sudden
turn for the worst. To answer the serious situation, government increased the
investment in fixed assets which made effective quantity increase in real estate
market. Therefore, disequilibrium degree decreased quickly. In 2009 to answer
financial crisis all over the world, government adapted loose monetary policy
and active fiscal policy to stimulate consumption demand of commercial housing
which caused the ascend of demand.
The study makes use of relevant statistics data of real estate from 1990-2009
in Jiangsu province with disequilibrium theory, establishes effective model
of supply and demand of real estate market in Jiangsu province in the basis
of hyperbole model. Through the model get effective supply quantity and demand
quantity of real estate market from 1990-2009 in Jiangsu province, calculate
disequilibrium degree. Empirical analysis shows that disequilibrium degree can
reflect the fluctuation of real estate supply and demand in the period effectively
and get the conclusion that the real estate in Jiangsu is influenced by average
sales price of commercial housing, gross domestic product, per capital disposable
income of urban households, process of city development and national macro-economy