Effect Of RMB Exchange Rate On The Real Estate Prices

In recent years, the RMB appreciation and rising real estate prices have become a hot spot of concern. Since July 21, 2005, China began to implement a managed floating exchange rate system which bases on supply and demand of market, with reference to a basket of currencies conditioning. the RMB-dollar exchange rate continue to record higher on the background of China's rapid economic development, the country's foreign exchange reserves rising and so on, December 14, 2007 ,it rose to 7.3589 RMB. On the other hand, China's real estate prices are also rising. 2006 domestic 70 large and medium-sized cities home sales rose 5.5 percent. The housing prices of Beijing continue growing over seven months in a double-digit.So whether appreciation of the RMB would affect the real estate prices ? how much it affected and how to affected ? This paper basing on our predecessors' study related to the qualitative and quantitative analysis, further made up and extracted the views of their predecessors. Hope to have a more comprehensive and more profound understanding of the inherent relationship between the two. Specific methods: 1, theoretical analysis. From the economic theory, it analyze three main effect (and the expected effect of capital inflows, domestic wealth effect, the effect of inflation) between the appreciation of the RMB and the property market; 2, empirical analysis. It make the empirical variables regression analysis ,to real estate prices as a result of variables ,to real effective exchange rate, GDP, per capita disposable income as variables ; 3, case studies. Through cases of Japan and Southeast Asian currency appreciation impacting the real estate market, it analyze how will the RMB appreciation endanger China's real estate market.Through the above study, the paper obtained the conclusions. RMB exchange rate has an important impact on real estate prices. The RMB exchange rate has a better flexibility to real estate prices. Real effective exchange rate ,one percent per dropping, will cause approximately 1.113 818 47 percent increasing in the price of real estate. During the appreciation of the RMB rising, the RMB exchange rate impacting on real estate mainly use the expected effect of capital inflows, effects of inflation, which would lead foreign hot money to invest in China's real estate, promote real estate prices higher. The excessive appreciation of the RMB is Likely to generate the real estate bubble just as Japan, Southeast Asia. It will blow to China's economic development seriously. From the above conclusion of the study, this paper concludes with the corresponding policy recommendations.