Research Of Evaluating The Degree Of Bubbles In Nanjing Real State Based On Indicator Systems

Since 2003, the industry of Nanjing real estate has been prospering, the proportion of the industry value added to GDP is recreating fast, up tol4.1 percent in2004. Furthermore the prices for real estate items are being up rapidly and the speculative demand for real estate booms. This paper proceeds to research on how to measure bubbles, causes of the bubbles' existing and policies to managing bubbles.The paper first defines bubbles and bubbles economy, and argues that bubbles can be partitioned four phases, i.e. safety, alertness, dange and high danger zone.Secondly, the paper generalizes and comments on the arguments for bubbles or non-bubbles in Nanjing real estate. Then assert that there exist bubbles but not bubbles economy in Nanjing real estate, because the proportion of investment in real estate to GDP is very higher which presents impulse investment, and price of house rise rapidly to the degree which is far from civilian's long payment capability, speculative demand is approaching international security line, while the consumption blooms and consumption anticipation doesn't change radically.Thirdly, the dynamic autoregressive bubbles test model shows that the autoregressive parameterλis 2.516%, which is very bigger than critical value 1.8%, proving the bubbles exist. The cobweb model demonstrates that the mechanism of real estate price's determining is nonstationary or characterizes diverging as positive feedback, which shows swelling of bubbles.Fourthly, the paper designs the indicator systems to evaluate degree of bubbles and a method of calculating the degree of bubbles, while partitioning bubbles as four phases, i.e.safety zone(03). According to this method, the degree of bubbles in Nanjing real estate can be calculated as 1.8, which means the bubbles is at the alertness zone and is approaching danger zone.Fifthly, the paper discusses the cause of bubbles' existing in Nanjing real estate.Finally, the paper claims that the policy on bubbles should abide by the guideline of "not batter but control" in respect that expected to shrink to safety zone other than burst.