Measuring network linkages of housing prices: Evidence from the Guangdong-Hong Kong-Macao Greater Bay Area

In this paper, we examine the pattern of network linkages of housing prices across a group of neighboring cities in the Greater Bay Area (the GBA). Using monthly data of housing prices across 11 cities in the GBA from June 2013 to December 2020, we explore the contemporaneous causal relationships as well as cross-city housing market connectedness within the GBA. Our findings provide evidence for contemporaneous causality in housing prices across cities in the GBA. There is a core-periphery hierarchical structure of transmission mechanism for housing price shocks that are transmitted from core cities to key node cities within the GBA in contemporaneous time. Moreover, the spillover index indicates that cross-city connectedness is an important source of volatility in the housing markets in the GBA. However, the patterns of housing price connectedness behave differently across categories of cities in the GBA. In addition, using the Quadratic Assignment Procedure (QAP) analysis, we find that similarities in economic openness and urbanization contribute to the strong linkages of regional housing markets in the GBA.