In the short run, current housing stock is considered as an important factor that affects house market, for example, if there is a increase in housing stock, it will restrict current real estate development and future land schemes. Another factor affecting the housing market is particular transaction cost such as VAT, stamp and registration duties and a variety of taxes. Moreover, uncertainty about future housing prices also could affect demand and supply of housing market. For instance, if people expect housing price will decrease in the next year, most of them definite not purchase a house this year, which will lead to a oversupply of housing market this year, then, corresponding changes in prices, and vice versa. In this case, under uncertainty situation, investors and developers are cautions response of changed demand in the market, because this type of investment is irreversibility.
Also, monetary policies adopted by the government play an important role in housing changes in short term. Ahearne (2005) test date of housing prices of 11 cities and find that housing prices increase in short time when government adopted monetary policies, he also find that when there is policy for bank to shrink supply of credit to households, housing price will decrease and low the demand of household. He surmises that interest rate is the most important factors that influence housing prices. For Chinese housing market, rapidly changes in housing prices as a vivid example perfectly proved these economics theory in the past ten years, because the policies adopted by government usually as a main factor determine trend of housing price in China. But according to Deng and Ma’ paper (2009), who used panel VAR models to find which factors could influence Chinese real housing price changes, they used a sample of 30 provinces (cities) in China during the period of 2000 to 2005, and they get the conclusions that interest rates and population growth cannot explain the variation of housing price in China. I have to admit there are some differences between Chinese and western housing market.
In generally, as mentioned above, these are some kinds of aspect on housing demand that provide a good explanation of housing behavior in western countries. However, it is debatable to apply all the current theories directly to urban China where a welfare-oriented housing system was reforming in the past decade. According to comparing western housing market and Chinese housing market, there are main two differences between these two kinds of market. First, it is generally presume there is a relative freedom choice in housing market in western models, even though exist discriminations (Massey and Denton, 1993). People could choice their house relative freedom according to their preference and affordability. But in China, there was only choice for people who live in urban is public rental house, where obviously much less freedom of choice. When the reforming put in to practice in 1998, people could spend relative less money to own the house where they used to rent, therefore, housing market still lack of choice of freedom for most people in China.
Second, the macro factor is affecting private housing choice in western cities, the role of the government is underestimated. However in China, the government plays an important role in private housing provision and allocation. Furthermore, housing reform in China is a nationwide program which means local government in each province could design actual reform programs, timetable and degree of reforming (Huang, 2003),Which result in different arrangements of housing behavior. Huang and Clark (2002) argue that there are still considerable variations in tenure choice across cities. They believe that different local government behavior will lead to the intercity heterogeneity. Zhou’s (2004) paper prove this theory, he test 4 Chinese cities’ house price include Beijing, Shanghai, Tianjian and Chongqin from 2001 to 2004, he find in different city, there are different factors will influence local housing price. In Beijing, household income, bank loans, housing units sold have an important effect on housing prices, but in Shanghai and Chongqing, price expectation and construction significantly influence housing prices. China’s real estate market consistent with economic theory in a way, but it is still with Chinese characteristics.