What Does Real Estate Bubble Do On The Related Industries?

The risk of real estate bubble is gaining more and more attention as the long-been-emphasized economy-supporting industry itself. Along with the improvement of the economic and financial development, the real estate bubble burst has been causing more scaled and prolonged damage in recent decades. An in-depth study of the real estate bubble and its influence will be meaningful to avoid the risk of a real estate bubble burst.In this paper, we choose a measurement developed out of the theory of rational expectations and partial equilibrium, after a through compare of a handful measurements, to analyze China’s real estate bubble problem from both nationwide and regional prospect. On this basis, we further study the impact of the real estate price bubble on the related industries by empirical testing and analyzing.The outcome of our research shows that, China has long been experiencing a relatively controllable nationwide real estate bubble, but the regional bubble in Beijing, Shanghai, Guangdong, Tianjin, Zhejiang, Fujian and Hainan is sufficiently severe. The real estate bubble in different provinces varies significantly and land price is an overwhelming external factor that stimulates China’s real estate bubble. Besides, our research also shows that when real estate bubble changes, related industries’ market returns, such as for the banking industry and metalwork industry, will perform in significantly altered ways. However all the related industries’ returns tend to change in a similar pattern when facing the bubble change, which is the in the opposite direction to the response of the real estate industry’s market return.Based on the above findings, our recommendations on the real estate regulative policy are:set reasonable macro-control policy objectives, make prudent decision of policy targets, choose macro-control policy instruments more rationally from a long-term perspective, enhance the implementation of macro real estate policy by local governments and monitor the transfer of real estate price bubble risk by controlling the scale of real estate credit.