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“Irrational” Housing Demand——A Study based on the Dual Attributes of House
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Title“Irrational” Housing Demand——A Study based on the Dual Attributes of House  
AuthorGong Gang, Zhang Lu and Wei Xiye  
OrganizationYunnan University of finance and Economics; Nankai University; Zhejiang University of Technology;; 
Key WordsHousing Demand;Housing price;Non-arbitrage Condition 
AbstractIn modern economics, a house is considered in two properties: one as a normal commodity, and the other as a financial asset. This paper studies the housing market based on dual properties. We construct a dynamic model with “heterogeneous expectations”. We find that the higher the growth rate of housing price, the larger is the demand for house. This is contrasted to the normal demand curve of a commodity. This result is also supported by the empirical data of Chinese economy. The dynamic analysis further proves that these dual properties make the housing market more vulnerable to bubble, and thus greatly hurts the economy when the bubble breaks. Based on this analysis, we suggest that the principle of government to manage housing market should be the restriction of the demand as “financial asset”, while supporting the demand as normal commodity.  
Serial NumberWP1289 
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