Cyclical fluctuations of Beijing residential housing market based on a wavelet analysis

This study analyzes the cyclical fluctuations of Beijing residential housing market using macro data in 1999-2014. This study uses a literature review to identify the limitations of current studies on real estate cycles and how to improve both the index selection and model simulations. The index selection uses objective weighting using a principal component analysis (PCA) to extract the core index and expand the sample data. The model simulation uses wavelet analyses to separate and rebuild the cyclical fluctuations. The empirical analysis shows a short 3.75 year short cycle and a medium 9 year cycle in Beijing residential housing market. The model indicates that the real estate market is entering a recession period in 2014, which will be noticed by market participants including investors, financial institutions and the government.