Productivity assessment of the real estate industry in China: a two-stage Malmquist productivity index
Abstract
Considering that the real estate industry is a critical industry to promote the economy in China, it is necessary to measure the real estate performance. However, few studies about the performance evaluation of China’s real estate industry have focused on the production process. To fill this gap, this paper proposes a two-stage framework to investigate the real estate productivity of 30 sample provinces on mainland China from 2008 to 2015, based on a common-weight global Malmquist productivity index (MPI). The major findings are shown as follows: (a) the real estate efficiency is low, and it is mainly caused by the inefficiency in the sales stage, not the development stage; (b) the development trend of the real estate sector in China is sensitive to the government policies, and the fluctuations of MPI are consistent with the direction of policy adjustment during the observation period; (c) as for the regional analysis of MPI, we introduce the concept of the dependence degree of the economy on the real estate industry and predict that MPI in economically underdeveloped regions may decline in the future. Finally, policy recommendations are provided for the high-quality development of China’s real estate industry.
First published online 25 January 2021
Keyword : real estate industry, China, two-stage, data envelopment analysis, common-weight global Malmquist productivity index
How to Cite
Liu, X.- xiao, Liu, H.- hui, Yang, G.- liang, & Pan, J.- feng. (2021). Productivity assessment of the real estate industry in China: a two-stage Malmquist productivity index. International Journal of Strategic Property Management, 25(2), 146-168. https://doi.org/10.3846/ijspm.2021.14199
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Cao, Z. L. (2003). General theory of real estate economics (pp. 281–297). Peking University Press (in Chinese).
Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2(6), 429–444.
https://doi.org/10.1016/0377-2217(78)90138-8
Chen, K., Song, Y. Y., Pan, J. F., & Yang, G. L. (2019). Measuring destocking performance of the Chinese real estate industry: a DEA-Malmquist approach. Socio-Economic Planning Sciences, 69, 100691. https://doi.org/10.1016/j.seps.2019.02.006
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Chiang, H. C., Tsaih, Y. C., & Hsiao, W.-C. (2016). The efficiency analysis of Singapore real estate investment trusts. Eurasian Journal of Business and Management, 4(4), 9–20.
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https://doi.org/10.1016/j.ejor.2006.11.041
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https://doi.org/10.1080/00036840701721166
Lampe, H. W., & Hilgers, D. (2015). Trajectories of efficiency measurement: a bibliometric analysis of DEA and SFA. European Journal of Operational Research, 240(1), 1–21.
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Li, K., Ma, Z., & Zhang, G. (2019). Evaluation of the supply-side efficiency of China’s real estate market: a data envelopment analysis. Sustainability, 11(1), 288. https://doi.org/10.3390/su11010288
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Liu, H., Yang, G., Liu, X., & Song, Y. (2020). R&D performance assessment of industrial enterprises in China: a two-stage DEA approach. Socio-Economic Planning Sciences, 71, 100753.
https://doi.org/10.1016/j.seps.2019.100753
Malmquist, S. (1953). Index numbers and indifference surfaces. Trabajos de Estadistica, 4(2), 209–242.
https://doi.org/10.1007/BF03006863
Miller, S. M., & Springer, T. M. (2007). Cost improvements, returns to scale, and cost inefficiencies for real estate investment trust. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1006300
Pan, J. F. (2019). DIIS theory and methodology in think tank (pp. 8–18). Science Press (in Chinese).
Pastor, J. T., & Lovell, C. A. K. (2005). A global Malmquist productivity index. Economics Letters, 88(2), 266–271. https://doi.org/10.1016/j.econlet.2005.02.013
PBC & CBRC. (2014). People’s Bank of China and China Banking Regulatory Commission: Notice on Further Improving Housing Finance Services (in Chinese). http://www.gov.cn/xinwen/2014-09/30/content_2759366.htm
SCC. (2009). State Council of the People’s Republic of China: Regulations of the State Council on Promoting the Healthy Development of the Real Estate Market (in Chinese).
http://www.gov.cn/ldhd/2009-12/14/content_1487025.htm
SCC. (2010). State Council of the People’s Republic of China: Notice of the State Council on Resolutely Curbing the Rapid Increase of Housing Prices in Some Cities (in Chinese). http://www.gov.cn/zwgk/2010-04/17/content_1584927.htm
SCC. (2011). State Council of the People’s Republic of China: Notice of the State Council on Further Improving the Regulations of the Real Estate Market (in Chinese).
http://www.gov.cn/zwgk/2011-01/27/content_1793578.htm
Seiford, L. M., & Zhu, J. (1999). Profitability and marketability of the top 55 US commercial banks. Management Science, 45, 1270–1288. https://doi.org/10.1287/mnsc.45.9.1270
Shi, W., Chen, J., & Wang, H. (2016). Affordable housing policy in China: new developments and new challenges. Habitat International, 54, 224–233.
https://doi.org/10.1016/j.habitatint.2015.11.020
Silva, T. C., Tabak, B. M., Cajueiro, D. O., & Dias, M. V. B. (2016). A comparison of DEA and SFA using micro- and macro-level perspectives: efficiency of Chinese local banks. Physica A: Statistical Mechanics and its Applications, 469, 216–223.
https://doi.org/10.1016/j.physa.2016.11.041
Tone, K., & Tsutsui, M. (2009). Network DEA: a slacks-based measure approach. European Journal of Operational Research, 197(1), 243–252. https://doi.org/10.1016/j.ejor.2008.05.027
Tone, K., & Tsutsui, M. (2010). Dynamic DEA: a slacks-based measure approach. Omega, 38(3), 145–156.
https://doi.org/10.1016/j.omega.2009.07.003
Tone, K., & Tsutsui, M. (2014). Dynamic DEA with network structure: a slacks-based measure approach. Omega, 42(1), 124–131. https://doi.org/10.1016/j.omega.2013.04.002
Wang, J., Lin, Y., Glendinning, A., & Xu, Y. (2018). Land-use changes and land policies evolution in China’s urbanization processes. Land Use Policy, 75, 375–387.
https://doi.org/10.1016/j.landusepol.2018.04.011
Wang, K., & Wei, Y. M. (2014). China’s regional industrial energy efficiency and carbon emissions abatement costs. Applied Energy, 130, 617–631.
https://doi.org/10.1016/j.apenergy.2014.03.010
Wang, W. K. (2005). A knowledge-based decision support system for measuring the performance of government real estate investment. Pergamon Press, 29(4), 901–912. https://doi.org/10.1016/j.eswa.2005.06.017
Wei, F., Li, Y., Gao, R., & Sun, J. (2011). Study on the evaluation model of the investment efficiency of real estate industry based on super efficiency DEA. Applied Informatics and Communication, 111–118. https://doi.org/10.1007/978-3-642-23235-0_15
Yang, G. L., Fukuyama, H., & Chen, K. (2018). Investigating the regional sustainable performance of the Chinese real estate industry: a slack-based DEA approach. Omega, 84, 141–159. https://doi.org/10.1016/j.omega.2018.04.009
Zheng, X., Chau, K. W., & Hui, E. C. M. (2011). Efficiency assessment of listed real estate companies: an empirical study of China. International Journal of Strategic Property Management, 15(2), 91–104. https://doi.org/10.3846/1648715X.2011.582739
Zumpano, L. V., Elder, H. W., & Crellin, G. E. (1993). The market for residential real estate brokerage services: costs of production and economies of scale. The Journal of Real Estate Finance and Economics, 6(3), 237–250. https://doi.org/10.1007/BF01096960
https://doi.org/10.1016/S0377-2217(01)00183-7
Anderson, R. I., Fok, R., Zumpano, L. V., & Elder, H. W. (1998). Measuring the efficiency of residential real estate. Journal of Real Estate Research, 16(2), 139–158.
Anderson, R. I., Lewis, D., & Zumpano, L. V. (2000). X-Inefficiencies in the residential real estate market a stochastic frontier approach. Journal of Real Estate Research, 20(1), 93–103. https://doi.org/10.1023/A:1007889209994
Avkiran, N. K., & Rowlands, T. (2008). How to better identify the true managerial performance: state of the art using DEA. Omega, 36, 317–324. https://doi.org/10.1016/j.omega.2006.01.002
Banker, R. D., Charnes, A., & Cooper, W. (1984). Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management Science, 30(9), 1078–1092. https://doi.org/10.1287/mnsc.30.9.1078
Bers, M., & Springer, T. M. (1997). Economies of scale for real estate investment trusts. Journal of Real Estate Research, 14(3), 275–290.
Cao, Z. L. (2003). General theory of real estate economics (pp. 281–297). Peking University Press (in Chinese).
Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2(6), 429–444.
https://doi.org/10.1016/0377-2217(78)90138-8
Chen, K., Song, Y. Y., Pan, J. F., & Yang, G. L. (2019). Measuring destocking performance of the Chinese real estate industry: a DEA-Malmquist approach. Socio-Economic Planning Sciences, 69, 100691. https://doi.org/10.1016/j.seps.2019.02.006
Chen, Y., Cook, W. D., Li, N., & Zhu, J. (2009). Additive efficiency decomposition in two-stage DEA. European Journal of Operational Research, 196(3), 1170–1176. https://doi.org/10.1016/j.ejor.2008.05.011
Chiang, H. C., Tsaih, Y. C., & Hsiao, W.-C. (2016). The efficiency analysis of Singapore real estate investment trusts. Eurasian Journal of Business and Management, 4(4), 9–20.
https://doi.org/10.15604/ejbm.2016.04.04.002
Emrouznejad, A., & Yang, G. L. (2018). A survey and analysis of the first 40 years of scholarly literature in DEA: 1978–2016. Socio-Economic Planning Sciences, 61, 4–8. https://doi.org/10.1016/j.seps.2017.01.008
Färe, R., & Grosskopf, S. (2000). Network DEA. Socio-Economic Planning Sciences, 34, 35–49.
https://doi.org/10.1016/S0038-0121(99)00012-9
Färe, R., Grosskopf, S., Norris, M., & Zhang, Z. (1994). Productivity growth, technical progress, and efficiency change in industrialised countries. American Economic Review, 84, 66–83.
Hu, X., & Liu, C. (2018). Measuring efficiency, effectiveness and overall performance in the Chinese construction industry. Engineering, Construction and Architectural Management, 25(6), 780–797. https://doi.org/10.1108/ECAM-06-2016-0131
Kao, C. (2009). Efficiency measurement for parallel production systems. European Journal of Operational Research, 196(3), 1107–1112. https://doi.org/10.1016/j.ejor.2008.04.020
Kao, C., & Hwang, S.-N. (2008). Efficiency decomposition in two-stage data envelopment analysis: an application to nonlife insurance companies in Taiwan. European Journal of Operational Research, 185(1), 418–429.
https://doi.org/10.1016/j.ejor.2006.11.041
Kao, C., & Hwang, S.-N. (2014). Multi-period efficiency and Malmquist productivity index in two-stage production systems. European Journal of Operational Research, 232(3), 512–521. https://doi.org/10.1016/j.ejor.2013.07.030
Kritikos, M., Markellos, R., & Prastacos, G. (2010). Corporate real estate analysis: evaluating telecom branch efficiency in Greece. Applied Economics, 42(9), 1133–1143.
https://doi.org/10.1080/00036840701721166
Lampe, H. W., & Hilgers, D. (2015). Trajectories of efficiency measurement: a bibliometric analysis of DEA and SFA. European Journal of Operational Research, 240(1), 1–21.
https://doi.org/10.1016/j.ejor.2014.04.041
Lewis, D., Springer, T. M., & Anderson, R. I. (2003). The cost efficiency of real estate investment trusts: an analysis with a Bayesian Stochastic Frontier Model. The Journal of Real Estate Finance and Economics, 26(1), 65–80.
https://doi.org/10.1023/A:1021522231824
Li, K., Ma, Z., & Zhang, G. (2019). Evaluation of the supply-side efficiency of China’s real estate market: a data envelopment analysis. Sustainability, 11(1), 288. https://doi.org/10.3390/su11010288
Li, N. (2008). Real estate cross-efficiency measurement based on peer appraisal DEA model and method in main cities of China. In 2008 International Conference on Management Science and Engineering 15th Annual Conference Proceedings, ICMSE (pp. 1667–1673). IEEE. https://doi.org/10.1109/ICMSE.2008.4669129
Liu, H., Yang, G., Liu, X., & Song, Y. (2020). R&D performance assessment of industrial enterprises in China: a two-stage DEA approach. Socio-Economic Planning Sciences, 71, 100753.
https://doi.org/10.1016/j.seps.2019.100753
Malmquist, S. (1953). Index numbers and indifference surfaces. Trabajos de Estadistica, 4(2), 209–242.
https://doi.org/10.1007/BF03006863
Miller, S. M., & Springer, T. M. (2007). Cost improvements, returns to scale, and cost inefficiencies for real estate investment trust. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1006300
Pan, J. F. (2019). DIIS theory and methodology in think tank (pp. 8–18). Science Press (in Chinese).
Pastor, J. T., & Lovell, C. A. K. (2005). A global Malmquist productivity index. Economics Letters, 88(2), 266–271. https://doi.org/10.1016/j.econlet.2005.02.013
PBC & CBRC. (2014). People’s Bank of China and China Banking Regulatory Commission: Notice on Further Improving Housing Finance Services (in Chinese). http://www.gov.cn/xinwen/2014-09/30/content_2759366.htm
SCC. (2009). State Council of the People’s Republic of China: Regulations of the State Council on Promoting the Healthy Development of the Real Estate Market (in Chinese).
http://www.gov.cn/ldhd/2009-12/14/content_1487025.htm
SCC. (2010). State Council of the People’s Republic of China: Notice of the State Council on Resolutely Curbing the Rapid Increase of Housing Prices in Some Cities (in Chinese). http://www.gov.cn/zwgk/2010-04/17/content_1584927.htm
SCC. (2011). State Council of the People’s Republic of China: Notice of the State Council on Further Improving the Regulations of the Real Estate Market (in Chinese).
http://www.gov.cn/zwgk/2011-01/27/content_1793578.htm
Seiford, L. M., & Zhu, J. (1999). Profitability and marketability of the top 55 US commercial banks. Management Science, 45, 1270–1288. https://doi.org/10.1287/mnsc.45.9.1270
Shi, W., Chen, J., & Wang, H. (2016). Affordable housing policy in China: new developments and new challenges. Habitat International, 54, 224–233.
https://doi.org/10.1016/j.habitatint.2015.11.020
Silva, T. C., Tabak, B. M., Cajueiro, D. O., & Dias, M. V. B. (2016). A comparison of DEA and SFA using micro- and macro-level perspectives: efficiency of Chinese local banks. Physica A: Statistical Mechanics and its Applications, 469, 216–223.
https://doi.org/10.1016/j.physa.2016.11.041
Tone, K., & Tsutsui, M. (2009). Network DEA: a slacks-based measure approach. European Journal of Operational Research, 197(1), 243–252. https://doi.org/10.1016/j.ejor.2008.05.027
Tone, K., & Tsutsui, M. (2010). Dynamic DEA: a slacks-based measure approach. Omega, 38(3), 145–156.
https://doi.org/10.1016/j.omega.2009.07.003
Tone, K., & Tsutsui, M. (2014). Dynamic DEA with network structure: a slacks-based measure approach. Omega, 42(1), 124–131. https://doi.org/10.1016/j.omega.2013.04.002
Wang, J., Lin, Y., Glendinning, A., & Xu, Y. (2018). Land-use changes and land policies evolution in China’s urbanization processes. Land Use Policy, 75, 375–387.
https://doi.org/10.1016/j.landusepol.2018.04.011
Wang, K., & Wei, Y. M. (2014). China’s regional industrial energy efficiency and carbon emissions abatement costs. Applied Energy, 130, 617–631.
https://doi.org/10.1016/j.apenergy.2014.03.010
Wang, W. K. (2005). A knowledge-based decision support system for measuring the performance of government real estate investment. Pergamon Press, 29(4), 901–912. https://doi.org/10.1016/j.eswa.2005.06.017
Wei, F., Li, Y., Gao, R., & Sun, J. (2011). Study on the evaluation model of the investment efficiency of real estate industry based on super efficiency DEA. Applied Informatics and Communication, 111–118. https://doi.org/10.1007/978-3-642-23235-0_15
Yang, G. L., Fukuyama, H., & Chen, K. (2018). Investigating the regional sustainable performance of the Chinese real estate industry: a slack-based DEA approach. Omega, 84, 141–159. https://doi.org/10.1016/j.omega.2018.04.009
Zheng, X., Chau, K. W., & Hui, E. C. M. (2011). Efficiency assessment of listed real estate companies: an empirical study of China. International Journal of Strategic Property Management, 15(2), 91–104. https://doi.org/10.3846/1648715X.2011.582739
Zumpano, L. V., Elder, H. W., & Crellin, G. E. (1993). The market for residential real estate brokerage services: costs of production and economies of scale. The Journal of Real Estate Finance and Economics, 6(3), 237–250. https://doi.org/10.1007/BF01096960