Exchange Rate Effects On China's 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, which 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,on December 31,2010,it rose to 6.58 RMB. On the hand, the Chinese real estate prices are also rising. On December 2010,domestic 70 large and medium-sized cities home sales rose 6.4 percent.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 predecessor's 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 method:1, status analysis, from the real estate market and current situation of the development process to analyze the impact factors of real estate prices, and thus leads to appreciation of the impact of rising real estate prices; 2, From the economic theory, it analyze three main effect(expected benefit mechanism, liquidity effect mechanism, wealth effect mechanism)between the appreciation of the RMB and the property market; and further analysis on this basis, real estate price appreciation and the internel relations.3, empirical analysis. first, do the relevant test between exchange rate and real estate prices. second, real estate prices on the exchange rate transmission on mechanism of the expected effect in the mechanism, the mechanism of circulation effect of an empirical test.Through the above study, the paper obtained the conclusions. RMB exchange rate has an important impact on real estate prices. Nominal effective exchange rate, one percent per dropping,will cause approximately 1.268057 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 benefit mechanism, the liquidity effect mechanism, which would lead foreign hot money to invest in China's real estate, promote real estate prices higher. based on this, the state regulation should take full account of the real estate exchange rates on real estate prices.