The Effects Of Financial Control Policies On The Impact Of Residential Property Prices

Since the housing reform in1998, China’s real estate industry has maintained rapidgrowth. Especially since2003, China’s real estate prices began to rise rapidly, first-tier citiesapparently tended to arise more bubble, and spread to the second and third tier cities. Despitethe rapid growth of real estate prices have stimulating effect on economic growth and relatedindustries, but the increasing real estate prices affected the stability of the social life in someextent. Therefore, the real estate industry is always one of the first macro-control targets inmost countries. Recently, for increasing prices in some cities and other issues, our governmenthad taken interest rates or credit means to regulate the real estate market. However, due tosome problems in real estate has not yet been fundamentally solved, these policies didn’tachieve their expecting effect, the real estate prices are still high. Currently, the urgent issuewhich need to be resolved is how to improve financial policy so that the regional real estatemarkets (especially in second-tier cities) regulating effect is more significant. However,previous studies only focus on the effect of the real estate market regulation policy from theperspective of East Midwest regional markets or from a single perspective of monetary policyinstruments, few scholars has studied the impact of financial policy tools on regional realestate market from the first&second-tier cities in perspective effects. Therefore, this paperfocus on the first&second tier cities in relevance and differences of different monetary policyinstruments regulating effect, analyze from the theoretical and empirical aspects to help thepolicy makers to the rational use of monetary policy to provide effective regulation of housingprices theoretical guidance and policy recommendations.This paper is based on the theory of supply and demand and excessive financial supporttheory, explore the influence that interest rates and bank credit policy tools to second-tiercities housing prices from both descriptive and empirical analysis. First, we do a describedanalysis about the history of China’s real estate market status and financial regulatory policies.Then, using the state-space model dynamically analyze the impact of rate and bank credit onthe house price of first and second-tier cities, discover the difference and relevance effect ofregulation control between the regions and within them. Finally, this paper put forward some reasonable suggestions for the current problems.The conclusion is that, in different period, interest rate and bank credit policy on the first&second tier cities housing price fluctuation is greater than the long-term effects. From theperspective of regional effect, the impact of interest rate and credit policy tools to the first-tiercities is greater than the second tier cities. From the perspective of policy efforts, the influenceof bank credit to the first and second tier cities housing prices is higher than the interest ratepolicy. Therefore, the government should carry forward the differential reform in lending rateaccording to the influencing effectiveness of policy, and continue to implement differentiatedcredit policies, in order to maximize the positive role of interest rate and credit policy so thatprotect the rigid demand.