Research On The Real Estate Bubble In China

In 2008, a package of economic stimulus policies were put forward by the Chinese government, out of the fear that American sub-prime loan crisis might inflict a blow to the domestic economy. Encouraged by these measures, the endangered Chinese real estate industry came back onto the fast track only after a mild dip in 2008. And new record-high prices were witnessed one after another in the real estate market later on, which caught the attention nationwide。Whether there is a bubble in Chinese real estate market has long been a controversial topic for years. The debate on it turns to be even fiercer after the wild price surge in 2009. Some believe Chinese real estate market has brewed a huge bubble, while others disagree, arguing the housing price rise is supported by robust necessary demands which are highly inelastic, it is also the inevitable outcome of the process of urbanization and economic development. They think the price will also continue to rise. The paper will focus on this very topic and study the data of China's real estate market in recent years to test whether there is a bubble. If there are, what is the main reason causing the real estate market bubble? Then provide some theoretical methods to solve the problemThe paper first reviews the previous relevant researches on real estate market price bubbles home and abroad. Then use theory and empirical method to study the issue of bubble in China's real estate market. In the theoretical part, the paper explains the concept of the real estate bubble, measure and the harm caused by the bubble, then briefly introduced the development history and current situation of China's real estate market. In the part of the empirical analysis, at first, based on the four categories of indicators mentioned above, the paper implies the bubbles are widely in existence in the current Chinese real estate markets and it has been moderate bubble. Then use econometrics methods such as unit root test, cointegration test and Granger causality test, the paper analyzes the main causes of the real estate bubble. It concludes excess liquidity, land price skyrocketing, fear of inflation and overly speculation. Finally, some suggestions are given according to these main reasons of the current real estate bubble, hopping it is useful to stabilize the real estate and whole economy.