Real Estate Bubble:Effects, Testing And Early-warning

During the world urbanization, large quantities population cluster in the urban area, we can observe the price of real estate in cities soaring. The rising of real estate price, especially the rising of residential house’s price, will achieve a bubble or not, is indefinite. If there is a real estate bubble existing, then it will influence the economic growth, even the consuming level, or the welfare level. So how to definite the real estate bubble, how to test the bubble, or how to govern the bubble are very important questions. Based on all the above thoughts, this dissertation shaped the research goal and the research structure.The real estate bubble is the excess of housing price over its value, the virtual part caused by speculation. The definition has two implications. On the one hand it means the price of assets overtop the market foundation and continually go up, on the other hand, the part out of market foundation can be called bubble. Real estate construction is workers’ product, and its price includes of profit, cost and tax. The price of building is relatively stable and easily distinguished. In fact, the real estate bubble we usually talking about mean the land price bubble. Land is scarce resources, poor reproducibility. According to the Marxist theory of political economy, the land has no value. The price of land depends on rent, namely rent capitalization. Real estate consists of houses and land, which hardly can be separated. So the virtual part of land price is the root of real estate bubble.Based on the understanding of real estate bubble, the paper uses experimental economics paradigm for reference. According to the special economics theory, the paper studies the value model of real estate. Testing the bubble, solution measure of the real estate bubble, transmission mechanism of bubble and its spatial effect are concerned. The formation of Real estate price bubble is the result of profit balance of parts in land market and housing market. It’s not hard to realize that the direct reason leading to real estate bubble is excessive speculation. In addition, consumer expectations, financial support, policy guidance, government behavior, foreign capital and other factors indirectly promote the formation of real estate bubble.Real estate bubble may transfer across different areas in the same city, and also may transfer in different cities. The two types are different. The former is based on rational expectations and migration across districts and the latter is based on the joint development of the financial effects and learning effects.We can determine if the real estate market is health through measuring the real estate bubble. Also it’s an important reference for control policy. In this paper, a variety of methods to measure the real estate bubble are outlined and empirical analysis is made. The early warning and preventive treatment to real estate bubble need to be studied from the real estate market cycle, and then determine the real estate market is overheated, moderate or cool. Also we can give different levels of alert.The expansion of the real estate bubble may damage the community.The social productive forces and the financial system may be seriously damaged, and the national economy may be taken into recession. As a result, it’s important to study the social effects of the real estate bubble for carry out effective measures to deal with the social problems when bubble occurs, so as to ensure social stability and sustained economic development.This dissertation pay more attention on the real estate bubble theory, mainly analyzes the residential housing market. The structure of this dissertation is just as below. The first part provides the research background; The second part analyzes the real estate market; The third part analyzes the reason of the real estate bubble; The forth part exams whether the real estate bubble existing in cities of Jiangsu province especially in Nanjing; The fifth part analyzes the transmitting mechanism of real estate bubble; The sixth part discusses the domino effect of real-estate bubbles, including economic effect and social effect; The seventh part is about system and governments’ conduct. The eighth part introduces the real-estate bubble alarm. In the last part of this dissertation, the full paper is summarized and some beneficial suggestion id put forward.