Financial Factors That Affect Housing Prices In China

Since the reform of housing system in 1998, the Chinese housing market has undergone enormous changes, while made important progress in development, there has also exposed some problems, and the rapid rise in housing prices is undoubtedly the core of the problem. There are many factors impact the housing price, this paper analyze the financial factors that impacting on housing prices from the perspective of housing financial system, and make an assumption that is the financial factors which directly lead to the fluctuation of house price.To prove this point this paper combined the qualitative analysis and quantitative analysis method. Qualitative analysis examined in detail the housing finance system in China. Found in the housing finance system, the factors that affect Chinese housing prices are mainly bank credit, interest rates, exchange rates and capital markets, so the next discuss in-depth of the function mechanism these factors on housing prices. And further the quantitative relationship of these factors and the housing price was tested. Test results show that bank credit is Granger cause of housing price and had the greatest impact on it. When credit (including bank loans and international capital inflows impacting on housing supply) increased by 1%, the average price of housing will increase by 0.15%, while housing sales (including bank loans and international capital outflows affecting the demand for housing) increased 1%, the average price of housing will rise 0.16%. But interest rates has little effect on housing price, when interest rates increase by one percentage, the average price of housing declined by only 0.0066 percent, and also failed to pass the test of significance. Based on theoretical and empirical analysis, the paper puts forward some policy recommendations such as improving multi-level housing system, reconstruction of housing finance system and to promote market-oriented interest rate reform.