An Investigation On The Bubble Of China’s Real State Market

The rapid development of China’s real estate market along with high prices, difficult financing problem, upstream and downstream industries to the brink of collapse, and many other issues, officially this series of chain reaction triggered a fierce debate over the existence of the real estate bubble. Real estate is very close to the various fields of the national economy, and the emergence of the real estate bubble is bound by some of the indicators of production, consumption and financial market performance. Therefore, by selecting close relations representative indicators to determine the price of a real estate security floating threshold, we can quantify the real estate bubble level and determine the degree of the real estate market bubble.In this article, we select the pricing index statistics in35cities and districts from1998to2011. After comparison and analysis of these data, we get the conclusion that the real estate market in China now is trending upwards quickly. Then we pick up5typical cities:Beijing, Shanghai, Shenzhen, Guangzhou and Chengdu, after calculation the real costs of purchaser at different area or cities are found out, this is the Imputed Rental Costs. After comparison with actual rent we find out that the price of house are too much higher and there is property bubble in some part of our real estate market. We learn that:first, house prices showed regional variations, while the national average masked to some extent the economic differences between cities. By calculating the ratio of the house price/earnings ratio or rent/price ratio, we may find that for a city house prices are overvalued, but for other cities, the conclusion may not be established; Secondly, changes in the real estate market fundamentals have different impacts on different cities. In particular, for the city whose housing supply is relatively rigid, the price relative to the rent is higher, and house prices are more sensitive to interest rate changes.Then, we selected the data of real estate investment and Gross Domestic Product of China between1986and2011in order to analyze the contribution of real estate investment on economic growth. First of all, we sort out the relevant data, and then use the methods of statistical improvements, Granger causality test and cointegration analysis to specify the relationship between the two variables. Finally, we obtained cointegration relationship of the variables through the error correction model. There existed long-term stable equilibrium relationship between economic growth and real estate investment, and real estate investment played a very significant role in economic growth. This article has been enlightened that real estate development must be coordinated with the pace of economic growth, and that unreasonable Real Estate hinders the healthy development of the national economy. Over-exploitation of the real estate will not only cause consumption crowding-out effect on investment, but also induced a more severe inflation, leading to macroeconomic fluctuations.