| Shanghai, as one of the major financial center in China, is a city of powerhouse in China's economic development. Therefore, it is apparent that the prosperity and stability of Shanghai's economy is of great significance to the overall macro economy. The fluctuation in the real estate market in Shanghai will exert negative influence on the real estate market of those periphery cities. If the fluctuation is serious enough, it will jeopardize the stability of the national real estate market, and even the whole financial system. So it is an urgent problem to solve how to keep Shanghai real estate market in the track of sound development and promote the stability of the financial system.To explore and induce the original causes of foam in the real estate market of Shanghai, this paper proposes a benchmark to measure and judge the foam in the real estate market, which can be used to predict the foam in two or three years, and effective policies and suggestions are put forward here specific to the outcome of the foam.This paper is to find out the causes of problems in current Shanghai real estate market, construct a composite index to judge and predict the degree of the foam over the past years and in the future respectively by comparing the real estate of Shanghai with that of Hong Kong and the U.S. and utilizing their development experience as a source of reference. In addition, this paper educes several major precipitating factors that lead to the foam in the real estate market through the Analysis on Relativity. Therefore, this paper appropriately helps to define the directions in making some regulations and correcting errors in unveiling and implementing policies.First, the origin of the formation of foam in real estate market is discussed and conclusions about the origin of the formation of foam in real estate market home and abroad are made. In the first chapter, some short-term and long-term causes leading to foam in China's real estate market are obtained. Short-term causes include structural and policy-related unbalance, while long-term causes are exemplified by land price and residents disposable income. Next, with the source of reference of Hong Kong real estate, foam in it is described and measures of risk-prevention are also listed. In the third chapter, quite a number of elements that influence the real estate market are first listed and analyzed, and then the analytical approach used in this paper to the correlation between macroeconomic variable and foam in real estate market is explained, and finally, three indicators to measure the foam in real estate are designed, namely, Price Index of City Real Estate/CPI (Value, Concurrent Indicators), Ratio of the investment in real estate development to investment in fixed property(Supply, Leading Indicators), and Vacancy Rate in the real estate market(Demand, Lagging Indicators). The investment of real estate development, as a concurrent indicator, reflects the decisions and promises made one to three years ago on the real estate market, which is of prognostic importance. The growth rate of real estate price, as a leading indicator, reveals the degree of boom in the current real estate market. The vacancy rate, as a lagging indicator, can be utilized to test whether the real estate market is over-developed or not, because it is a symbol of the oversupply and the unbalance in the demand of investment or speculation in the real estate market. The product of the three indicators, as the composite index in real estate market, is used to judge whether there exists foam in real estate market and appraise the degree. At the beginning of Chapter Four, the impact of US Subprime Lending Crisis on Shanghai is described, and then the development history, current situation, and major characteristics of Shanghai real estate market are introduced. The composite index in real estate market is taken to evaluate and predict the degree of foam in Shanghai real estate market. At the end of this chapter, the result is analyzed with the help of the five elements shown in the third chapter. In addition, some comparisons about non-performing loans (also called dead loans) between Shanghai and the United States are made with the latest loan statistics of Bank of Shanghai. In the fifth chapter, some major problems of current Shanghai real estate market are under discussion, and some corresponding strategic methods are proposed as well. It is concluded in this paper that foam in the real estate marker of Shanghai has been inflating in the last several years and it has been overdeveloped. Thereby, it is of great significance that the foam in the real estate of Shanghai should be on people's guard in Beijing Olympic Games and Shanghai EXPO in two or three years.There are three innovations in this paper. First, it is the innovation in method. How to select the concerned test indicators is revised to make them more suitable for China's real estate market. Moreover, on the basis of the large floating population in Shanghai, the ratio of lease area to the sales area of the real estate is regarded as the vacancy rate. What's important, the Residents Disposable Income is used to take the place of the most commonplace House Price Ratio. Second, it is the innovation in points of view. It is proposed that the value of investment in the real estate should be less than that in those countries owning the entire property right on the condition that China is currently undertaking the Land Leasehold System. Attached to the fact that China is now undertake the Land Ownership System, it is also put forward that the older the real estate is, the smaller the extent of the fluctuation of housing price, and the more obvious the consumption characteristics will be, while the investment value will be reduced correspondingly. It is even raised that the leasing price used to measure the degree of foam in the real estate market is quite an important factor when the real estate price is up. If the deviation between the leasing price and real estate price is becoming bigger and bigger, then the foam will be compounding. Apart from them, the origin of the formation of foam in the real estate market is categorized into short-term and long-term causes. Third, it is the innovation in the train of thought. For example, on account of the problem of floating population in Shanghai, it is suggested that the government should step their support in the lease market, the support for the solution of the residents housing problems should be included into public financial expenditure policy, the housing fund should be allowed to pay the rents, and keeping the rate of housing fund loan rate constant for a long time and increasing the commercial loan rate should be undergone. |
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