Is urbanization improving real estate investment? A cross‐regional study of China

This paper applies bootstrap panel Granger causality to test the relationship between urbanization and real estate investment from 1990 to 2014 for 29 provinces in China. We argue that the patterns of interaction between urbanization and investment in real estate vary across regions. The results show that urbanization does Granger‐cause investment in real estate, primarily in the central and northeastern regions of China, while urbanization does not Granger‐cause investment in real estate in the eastern and western regions, except for four provinces. Most regions do not have a Granger‐causality relationship from real estate investment to urbanization; the exceptions are Henan and Hei Longjiang provinces. Our results only support one theory on the relationship between urbanization and the real estate market for one‐third of the provinces. Thus, urbanization can improve real estate investment by increasing the demand for housing as a result of population agglomeration, but urbanization does not depend on real estate investment in China.