Impact Of Real Estate Credit In China To House Prices From The Incremental Angle

In2003, the real estate became the mainstay industry of the national economy. During the next10years, the booming real estate market has been the backbone of the national macroeconomic development. To guide and promote the development of the real estate healthily is conducive to maintain the steady and rapid growth of economy, and help to meet the basic housing need of the public. Real estate is a capital-intensive industry. But unlike other industries, it has a long construction period, demands much more capital, and its products are high-value.Because the financial market in China is underdeveloped, the financing channel of real estate market is relatively simple, which its capital is mainly from bank loans. Therefore, the relationship between the real estate market and the credit market in China is very close and they support each other. The total real estate credit include development loans and individual housing loans, both of which meet the capital demand from the supply side and the demand side in real estate market. The development loans contribute to the growth of the market supply, and the individual housing loans promote the growth of the market demand. The difference of credit allocation to developers and individuals, will affect the market supply and demand. Furthermore, it will affect the house prices.Based on the existing research, the author proposes a different angle, trying to study the relationship between real estate credit and house prices from the incremental level. First, the author makes a theory analysis on the interaction mechanism between the real estate credit and house prices, both of which are affected by external factors. After that, the author made a qualitative analysis on the real estate credit and house prices, on the basis of the description of the current situation, trying to analyze the impact of development loans and individual housing loans to house prices. Secondly, the results of Granger causality test show that there is Granger causal relationship between the real estate credit growth and house prices growth:the increase of real estate credit growth will push the house prices growth, and conversely also established. After the study on the Granger casual relationship between the above two, the author use the VAR model to further study the impact of individual housing loans growth and development loans growth to the house prices growth. The empirical results show that in short term, the development loans growth will promote the house prices growth, but in long term, it will slowdown the house prices growth; while the individual housing loans growth will always contribute to the house prices growth. Finally, combined the theoretical and empirical analysis, the article propose some relevant policy recommendations on how to control the fast growth of house prices.