Research On Early-warning Approach Of China’s Price Bubble In Housing Market

Recently, China’s real estate industry develops advance rapidly and has become the pillar industry of national economy. Therefore, healthy and sustainable development of the real estate industry is directly related to whether the whole national economy of our country is steady or not. In recent years, the price of the commodity residential housing market in China rises year by year. The housing price growth rate in some areas or urban in China is even much higher than the growth level of some developed countries. All of these makes the real estate became the common hot topic between people, the scholars, and the businessmen.For the existence of the real estate market price bubble in China, different scholars have very different points of views. These points can be summarized into two kinds:"bubble theory" and "non-bubble theory". Because different scholars have differences in the definition of "bubble", the observing indexes, and the method of measure, either of them has their own opinions and reasons. However, for the particularity of the real estate industry development and vast geographical area in our country, the development of real estate in different parts will certainly be different. A set of accurate, feasible, and suitable measure approach can not be found to measure and calculate our country’s real estate market price bubble. And it is easy to fuzzy the conclusions. The policy makers and the real estate developers might also be puzzled.The essay introduces the related theories of real estate at the very beginning including its definition, characters, reasons, harms, and so on. And then, the essay summarizes the existing real estate bubble measurement and early-warning methods. They are Index method, Model method, Statistical method, and Income Reduction method. The essay also shows the advantages and disadvantages of each method. Based on the idea of Income Reduction method, this essay puts forward the econometric model of measuring the price bubble of real estate and explains the variables one by one. Furthermore, the essay takes Shenyang as an example to collect the data needed in the model, test their stationarity, calculate their first difference, and test the co-integration of the variables. Later, the essay uses the data to make regression analysis to the model and test the regression model. According to the model, we can calculate the degree of the bubble and early-warning real estate price bubble. Finally, the essay proposes some suggestions and recommendations on Shenyang real estate development according to the results get from the model regression. And then, the essay shows the shortage of this research and the possible research direction in the future.This essay aims to put forward a set of accurate, feasible, suitable, and widely-used measure approach to calculate and early warn the bubble of real estate, which is suitable for policy makers and real estate developers. This will allow the policy makers and real estate developers have rules to follow, have reasons to depend on, and have methods to apply when they are making decisions.Hoping that through this article’s analysis and elaboration, people can understand the real estate bubble more clearly and objectively. At the same time, this article allows the government to use effective ways for China’s real estate market regulation and specification. Thus it can promote our country’s real estate industry to develop healthy, steady, and sustainable.