Research On The Effect Of The Excess Liquidity On Real Estate Market Price In China

In this paper, The author does the theoretical and empirical analysis of the influence onexcess liquidity to China’s real estate market and the agglomerate effect (polarization effectand diffusion effect).Firstly, Combining with the theory of excess liquidity and real estatemarket, the author analyses the reason, path, result and so on of excess liquidity affectingChina’s real estate market. Furthermore, combining with the data of the current China’s realestate market and broad money balances (M2), the author tests the relevant theories ofChina’s current real estate market empirically.Secondly, combining with the theory of agglomeration effect (polarization effect anddiffusion effect) and Porter’s Diamond Model, the author analyzes the motivation andresults about polarization effect and diffusion effect on China’s real estate market whichaffected by the excess liquidity. The author also analyzes the transformation condition andthe mechanism about the polarization effect and diffusion effect in China’s real estatemarket. Next, combining with the present situation of China’s first-tier cities and third orfourth line cities, the author tests the polarization effect of the real estate market empirically.Furthermore, the author predicts the future development trend of China’s first-tier cities andthird or fourth line cities by using Markov Stochastic Process Theory. And on this basis, theauthor tests the diffusion effect of the real estate market.Finally, the article concludes that the excess liquidity is the dominant incentive aboutthat China’s real estate price continues to rise up, furthermore, polarization effect exists inthe China’s real estate market which affected by the excess liquidity at the present. At thesame time, based on the current trend of China’s real estate prices, the author makes thereasonable forecast which is that the polarization effect of the real estate market will beconverted to the diffusion effect at some point in time. According to the conclusion, theauthor gives some specific policy recommendations.