The Analysis Of Influence Of Interest Rates On House Prices

The history of housing sales can be trace back to ancient society.It is already30years since the real estate have formed an industry. In1992, the reform in real estatebegan in all aspects. But it spent10years from chaos to stable, finally leading to a newnational pillar industry. However, since2003, the speculative demand of the real estatehas continued to expand, and some banks expand the credit limit mindlessly. Those factsresult in the artificially high prices, the bubble of real estate market, and intensifyingsocial contradictions. The government has formulated a series of adjustments in order tocontrol these problems, such as purchase order, the property tax, hoping preventing thereal estate market from illness development, in order to solve the relevant livelihoodproblems.Of many national policies, the primary means for government to limit the real estateprices is the monetary policy. As one of the3weapons of it, the interest rate is thecommon monetary policy. It has an impact to both supply and demand. For one thing, itis always a large investment for the real estate enterprise, so the enterprise will borrowfrom the bank instead of using all its money, or else it will inevitably lead to tightliquidity, even serious funding strand breaks. For another, generally, the house will costthe working-class many years`saving, and with the influence of the tradition, the househas a rigid demand. Both supply and demand are dependent on bank loans. The level ofinterest rate can be seriously affecting the cost of the two sides. Therefore, the study ofimpact of interest rate on real estate prices is of great significance for the maintenance ofthe real estate market stability.We analysis the history of the real estate market of China. We look for the factorsfrom the supply and demand that affects real estate prices, and we find the interest ratesare a specific factor that both affect the real estate supply and demand. Then we introducethe interest rate policy that the government has used in recent years. We have atheoretical analysis of the mechanism of interest rates and the interest rate on real estateprices will play an inhibitory role. Excel software and eviews software also are implied inthis article. The empirical analysis of the relationship between interest rates, the real estate prices and the main indexes draw that interest rates have an influence on the realestate price index, which is not obvious. In consideration of this conclusion, the interestrates have an effect on real estate prices, but the effect is lack of timeliness. And this factmainly dues to interest rate controls and the incomplete of real estate market. Finally, forthese two reasons, the article offer advises on improving the real estate market and theinterest rate marketization.