Research On Excessive Real Estate Investment In Post-crisis Era

After China implemented the reform of commercial housing marketization, with the increasinglyquickening progress of Chinese urbanization, the real estate market of China has experienced a rapiddevelopment period starting from scratch. Especially, from2003to2007, it has ushered the golden time fordevelopment. However, as the financial crisis hit in2008, the thriving real estate industry could not wallitself off the effects of the crisis, either. At that year, the sales quantity and the sales both dropped and tookon a negative growth. But the trend of real estate industry in China stopped decreasing and beganincreasing rapidly. Although the speed of increase is a little slow, the total number has been still increasingyear by year. At the same time, in order to cope with the financial crisis, the Chinese government launcheda4trillion investment plan including a series of bailout policies. Whereas, in the following two years,many specialists and scholars said that reckless investment and blind investment resulted in the problems ofduplicated construction and surplus production and extremely inefficient capital utilization. By analysis,this paper hope to find whether there is the problem of over-investment the real estate industry in China ornot, and try to figure out its root reasons and put forwards solutions.Over-investment has been studied for a long time. In western world, the mainstream factors forover-investment are as follows: information asymmetry, entrustment of an agent, free cash flow hypothesis,and so on. Stemming from the late1980s, behavioral economics analyze this problem from the perspectiveof micro-psychology. This paper would like to analyze real diagnosis to find whether there isover-investment phenomenon in real estate companies. Based on the verification and the actual situation ofChina, this paper would also dissect this phenomenon from the perspective of micro bodies and the Chineseeconomic system through mathematical model of behavioral economics, etc.Chapter one is introduction. It introduces generally the background, purpose and significance of thisresearch,and summarizes the current theories for explaining the over-investment and the former researchesbased on these theories.What’s more, this chapter also describes the methods and ideas about the research.Chapter two is to generally introduces the important role of real estate industry in China’s economicdevelopment, its current development and the over-investment phenomenon in this industry. Chapter three is to introduce the current development of the real estate industry in China and come up with relatedquestions through descriptive statistics. Chapter four is the analysis of the empirical analysis. UsingRichardson’s prediction model, this chapter is about verifying the over-investment situation in listedcompanies in Chinese real estate industry. Chapter five is to build the semi-rational mathematical model ofbehavioral economics and then analyze and explain that the overconfidence of developers leads to theover-investment phenomenon from the micro level. Chapter six is to analyze the problem ofover-investment in Chinese real estate industry from the perspective of the industry itself and nationaleconomic system, and it is further discussed in four parts: the presale system in real estate industry, the levyof the real estate tax, the loads of real estate and interest non-market, and the construction of guaranteedhouses. Based on the analysis, reform suggestions are put forward. Chapter seven is the conclusion. Thischapter sums up the whole paper.