Is the Chinese housing market bubbling?

Some economists believe that the tightening financial regulation and the tightening housing market regulations would cool down the  Chinese housing market and lower the overall housing price, this would lead to lowering consumption. Therefore, there are many methods to measure bubbles; however, eventually, a bubble is based on people's opinions and expectations. In addition, the market information (supply and demand relationship) is a very important factor to determine people's opinions and expectations.

When more and more people are moving to the urban area, there should be an increase in the housing price in the urban area. The housing prices in Beijing, Shanghai, Shenzhen and other large cities have been skyrocketing for decades since the population sizes in these cities have been expanding rapidly due to the economic attraction and opportunities these cities have. Housing prices are positively correlated with economic attraction; therefore, the rapid increase in the housing prices in these cities with tremendous economic attraction makes sense. However, a general increase across the country does not make that much sense. Houses in different areas are substitutes, which means when the demand for one good increases, the price for the other good should fall. When the demand for houses in the large cities increases, the house price in other areas should fall.

Therefore, it is reasonable to see housing prices skyrocketing in large cities, like Beijing, Shanghai, as they are economically attractive and more and more people want to move to these areas; however, since people are rushing to large cities, this adds downward pressure on the housing prices in other areas that counters the upward pressure created by the increase in the overall income level.