The Effect Of Financial Credit On Housing Price

In the past decade, China’s real estate industry has achieved great improvements with the development of national economy. However, housing price has kept fast rising as well. To orderly lead real estate market and avoid housing bubbles, the central government has put forward a series of regulations and policies, among which, credit policy is one of the most useful measures. Housing fluctuations are related to the changes in credit scale, whereas, the results of credit policy are usually not as expected. On the one hand, the influence of financial credit policy on housing price shows regional heterogeneity due to the expanding disparities among regions. On the other hand, positive credit policy usually has great effects, while negative credit policy is not useful enough to fulfil the target, which shows an asymmetric effect. From this point, the paper aims to analyze the influence of financial credit policy on housing price and explain its regional effects and asymmetric effects.On this basis, the paper conducts the following researches:(1) Building a theoretical model of financial credit impacts on housing priceThe paper builds a dynamic stochastic general equilibrium modeling consist of real estate sector to analyze the exogenous impacts of interest rate, credit supply and housing demand on housing price. Both theoretical model and the simulation of impulse response function show that the positive financial credit policy, the preference of housing demand and the negative impact of interest will lead to an increase in housing price. As the rise of housing price, the inflation is escalating as well. At the same time, the borrowing capacities of households and real estate enterprises will expand, which shows an effect of financial accelerator. Besides, the results of the simulation indicate that the effect of credit regulation is more significant than that of interest rate adjustment on controlling housing price.(2) The study of regional effects of financial credit impacts on housing priceAs the expanding of economic disparities among regions of China, the spillover effect of housing prices in different regions, which has an impact on the effects of financial credit, is becoming more and more significant in real estate studies. The paper adopt GVAR model based on quarterly data of 35 major cities in China during 2002-2010 to analyze the regional heterogeneity of financial credit influence on housing price, combined with housing price spillover effect. The findings indicate that, the spillover effect has weakened the shock of financial credit on housing price and results in regional heterogeneity. As for regional heterogeneity, both the responsive intensity and speed of bank lending shock on housing price are greater in the eastern region than that in the central and the western regions, while the time of its convergence to steady state is shorter in the central and the western regions.(3) The study of asymmetric effects of financial credit impacts on housing priceFocusing on the asymmetric effects, the paper explains how market frictions, such as expectation and financial accelerator, influence on the relationship of financial credit and housing price by using CC-LM model. Meanwhile, the credit supply of shadow banking is also considered in the model. On the basis of theoretical analysis, the paper conduct an empirical study with the monthly data during Jan 2008 to Oct 2015 by HP filter analysis and SVAR model. Both the theoretical model and the empirical study show that the effects of positive financial credit impact are more significant than that of negative financial credit impact, and the development of shadow banking amplifies the asymmetric effects.The main theoretical contributions of the paper are as follows. First, by building a dynamic stochastic general equilibrium modeling consist of real estate sector, the paper clarifies the relationship of financial credit and housing price on theoretical level. Second, the paper examines the regional effects and asymmetric effects of financial credit impacts on housing price. These studies analyzes the spillover effect and the impact of shadow banking, which makes the findings more meaningful.