A Study On The Effect Of Changes In Interest Rate On China's Housing Demand

This thesis begins with theoretical analysis on the effects of changes of interest rates on housing demand in China. Interest rate changes not only affect consumers'investment demand for housing, but also affect consumers'consumption demand for housing . Then, with the ideas of theoretical analysis, this thesis study the effects of interest rate changes on housing demand in China. Interest rate was consistently high before 1999, and it was much lower after 1999. Analysis results suggest that, firstly, the big decrease in interest rate significantly improve consumers'housing-purchasing capability and therefore, stimulate their consumption demand for housing; secondly, the big decrease in interest rate lower the attractions of saving in banks and thereby, greatly stimulate consumers'investment demand for housing.Based on China's housing reform process, this thesis built econometrical model in order to analyze the effects of interest rate changes on China's housing demand after 1999. Empirical results show that, China's housing demand is determined by housing prices and residents'income level, and the effects of interest rate changes on China's housing demand are not significant. The reason for this is that, in years after 1999, China's interest rate was consistently low and the degree of changes in interest rate was small. Finally, this thesis offer some suggestions for policy makers.