Price and Trading Volume in Chinese Housing Market

It is important to understand the mechanism about the relationship between house prices and trading volume in the real estate market. The paper analyzes the housing markets in the 30 provinces (autonomous region and municipality) statistical areas in China from 2003 to 2009, treats both prices and volume as endogenous variables, studies the relationship between house prices and trading volume by using the three-stage simultaneous equation regression (3SLS) method. AT quarterly frequency, the results show that there is a statistically significant lagging positive correlation between house prices and the number of houses sold and house prices are dominant. In addition, both house prices and trading volume are affected by conditions in land market, the disposable income and their respective lagging indicator.