Is Shenzhen Housing Price Bubble that High? A Perspective of Shenzhen Hong Kong Cross-Border Integration

In this paper, monthly data from May 2004 to December 2011 are used to calculate the equilibrium housing price predicted by the economic fundamentals of Shenzhen and additional economic fundamentals of Hong Kong under the background of the Shenzhen Hong Kong cross-border integration. Equilibrium housing price is then compared against the actual housing price to test the degree of the Shenzhen housing price bubble during the studied period. We find that aided by the economic fundamentals of Hong Kong, the Shenzhen housing price can be better explained and the gap between the actual and equilibrium housing prices can be largely reduced, thus implying a much smaller Shenzhen housing price bubble.