  There is a growing concern in recent years over the potential formation of
bubbles in the Chinese real estate market. This paper aims to conduct a series
of bubble diagnostic analysis over nine representative Chinese cities from two
aspects. First, we investigate whether the prices had been significantly
deviating from economic fundamentals by applying a standard Engle-Granger
cointegration test. Second, we apply the Log-Periodic-Power-Law-Singularity
(LPPLS) model to detect whether there is any evidence of unsustainable,
self-reinforcing speculative behaviours amongst the price series. We propose
that, given the heterogeneity that exists amongst cities with different types
of bubble signatures, it is vital to conduct bubble diagnostic tests and
implement relevant policies toward specific bubble characteristics, rather than
enforcing one-that-fits-for-all type policy that does not take into account
such heterogeneity.
