The Study On Relationship Of Real Estate Price And Economic Growth In China Under The Perspective Of Credit Constraints

Since 1998 our country executes the housing commercialization reform, our country’s real estate industry has experienced rapid development more than ten years. The real estate industry as the basic and pillar industry of the national economy, to a great extent, affects the development of the city and other industries. So the stability of the real estate price is closely related to the stable operation of the national economy. But as the city real estate price rising, C hina’s real estate market has shown a significant bubble. Our research shows that, the average housing price to income ratio of 100 representative cities in our country at the end of 2014 reaches 7.46, the housing price to income ratio of the first-tier cities such as Beijing,Shanghai and so on is as high as more than 20, this is enough to show that the bubble phenomenon of the current real estate market is still quite serious. Real estate bubble on the one hand will weaken the purchasing power of residents, making it harder to solve the housing problem properly, affecting people’s livelihood and social stability. On the other hand, it may also weaken the financial system, and even trigger a financial crisis. It is because that, most of our country’s commercial bank’s loans are based on real estate mortgage loans, and real estate loans accounted for the high proportion of all bank loans. O nce the real estate bubble burst, commercial banks’ non-performing loans will rise sharply, induce bank bankruptcy, financial crisis in the end.Therefore, C hinese government issued a series of policy measures, and strived to regulate the real estate market. Although having made some achievements, but the housing bubble problem has not been solved thoroughly, must to squeeze unceasingly, to increase stable and healthy development of our country’s housing market. But the reality is, the economic growth in some areas is weak and growing weaker, local government have to provide “bailout”, boosting the real economy, which in turn stimulated the rise in real estate prices. How to solve this dilemma, becoming the starting point of this article : From the perspective of credit constraints, by alleviating credit constraints reasonable to try to improve the efficiency of prices influence on economic growth may be a feasible way. So that housing price rise modestly to promote healthy growth and development of the national economy, in turn, economic growth can lead to resident income raise, and then the resident income raise can continue to lower the housing price to income ratio. This can promote the stability and enhance of economic growth, and then compress the housing bubble constantly.Firstly this paper fully studies and draws lessons from the existing literature, analyzing the development situation of our country’s real estate market, macro-economy and the credit markets. Secondly, we carries on the theoretical analysis, basing on credit constraint perspective, from the aspects of total consumption and total investment analyzing how credit constraints change the efficiency of housing prices on economic growth, holding a view that when credit constraints caused by financial regulation is loose, the ability of rising prices leading to an increase in consumption and investment will be enhanced, and the acceleration of rising prices leading to an increase in economic growth will be also enhanced.Thirdly, we conduct an empirical test by Hansen(1999) panel threshold model, collecting the related data of China’s 31 provinces from 2005 to 2012, estimating whether it exists a non- linear relationship between China’s housing price and economic growth, namely a threshold effect. The results find that: When will the credit constraints as a threshold variable, the impact o f housing price rising on economic growth exists a significant single threshold effect. In the slack interval of credit constraint, the effect of housing price rising on economic growth is markedly higher than the one in the tight interval of credit constraint, which presents non- linear regime change and negatives the inertial research mode of setting the relationship of hous ing price and economic growth to linear. Furthermore, in general the constraint of China’s credit market is still tight, leading the effect of housing price rising on economic growth limited. Therefore, nowadays a part of China’s real estate price bubbles has been squeezed out, but not the all, for avoiding economic recession, we have to improve the efficiency of the influence of housing price rise on economic growth through further perfecting credit market and weakening credit constraint properly, the government shouldn’t provide bailout and urge the housing price entering in a rising track.Finally, in the light of the outcomes of empirical analysis and theoretical analysis, and combining with China’s current national conditions, putting forward concrete policy suggestions in improving credit market, reasonable weakening credit constraints, the purpose is to promote the coordinated development of credit market, real estate market and macro-economy in China.The innovation points of this essay are: Firstly from a new angle of view,which is credit constraints, we depict the different influence of housing price changing on the economic growth under the different intensity of credit constraints, thus raise that by reasonably regulating the level of credit constraints, to enhance the efficiency of housing price rise on economic growth, in order to give full play to the promotion of China’s real estate market’s development on economic growth; Secondly, we measure the nonlinear relationship between hous ing price and economic growth by using Hansen panel threshold model, and change the most of linear research model in the past, deepening the conclusion persuasiveness and credibility. However there are some disadvantages in this paper inevitably: Such as the measuring of credit constraints indicators is need to accuracy further; In the research field, we only has carried on the empirical analysis with the national panel data, don’t carry on the empirical analysis with the regional panel data.