Research On The Relationship Of Excess Liquidity With Real Estate Price In China

In recent years,rising house prices in China caused great concern to society. Especially since 2003,the real estate prices rose at a higher sustained level,far beyond the capacity of ordinary residents.Many researches believe there are bubbles in real estate and too high real estate prices have become a serious social problem. Accompanied by rising house prices,the problem of excess liquidity in China is increasingly coming out and becoming the focal point of research.What kind of relationship is between real estate prices and excess liquidity? How does excess liquidity have an impact on real estate prices? As well as what kind of macro-control policy can control prices effectively? All these become the focus of this paper.In this paper,taking the Japanese real estate bubble and sub-loan crisis in the United States as examples,we analyze the relationship abroad between excess liquidity and real estate prices.From the examples of Japan and the United States we can see excess liquidity will have an impact on the real estate market,influence real estate prices,then give birth to the real estate bubbles.Monetary policy which was taken by Government can control excess liquidity then affect the real estate market,but too frequently,too much effort macro-control policies often cause the breakdown of the real estate bubbles,and then have a negative impact on the economy.Basing on the analysis of foreign cases,this article studies China's real estate and the conditions of excess liquidity and establish relational models between excess liquidity and real estate prices to carry on the relevant analysis.Results showed the two have a remarkably positive correlation,that is,the excess liquidity degree enhances,and real estate prices also rises. Then,this article analyzes how the excess liquidity affects real estate prices in China. In recent years,China's excess liquidity influence real estate prices in three aspects. First,continue to promote the growth of real estate investment,resulting in overheated real estate investment;second,promote real estate development costs rising,especially cost of land;Third,intensified China's real estate market supply and demand imbalance in recent years,raised the effective demand of the real estate market,especially investment and speculative demand.Further it revealed that:rising land prices,real estate supply and demand imbalance are only the surface reasons for rising real estate prices,but excess liquidity which gives rise to real estate prices is the factor at the deepest level.To solve the problem of the excess liquidity and house prices,China's macro-policies are adopted to control and regulate,although certain positive effects have been got,but they are not satisfactory,primarily because monetary policy has lagged behind,and too frequently macro-policies often cause over regulation and control when effects of macro-policies are not fully apparent,this may repeat the mistakes of Japan and the United States.This article holds that:to solve the house problem,it is necessary to curb excess liquidity in real estate markets,and we have to take various measures to comprehensive control.