The Real Estate Market Bubble Formation And Early Warning

In modern society, real estate is not only a kind of substantial fortune which could be used straightly in manufacture and consume,but also as a more important part of domestic and industrial assets. With characteristics of fictitious capital being strengthened constantly, real estate has been an another important fictitious assets besides financial assets. Additionally, as the development and form of market economic system in china, the flow of social resource is more effective and convenient. On the aim of pursuing the maximum profit, the monetary capital will flow more quickly to high repay industry. On this macroscopical background, the real estate price which could be decided by the price-making style of capitalization will bring into economic bubbles on the speculation and anticipation of mass following. The bubbles is very easy to make the society fluctuating. Recently, the discussion of whether housing price bubbles exist or not in big cities such as Shanghai and Beijing has been more serious. So the research of forming mechanism of real estate bubbles will be full of theoretic and realistic signification.This paper will discuss the mechanism of the real estate price and the causes of the price bubbles. On the basis of summarizing former theories of the real estate bubbles, the author trys to develop a new way to analyse the problem. In addition, the paper also attempts to measure the bubble by adopting an econometric method, which may serve as an alarm so that we can take some allieviating actions before the bubbles bomb.The author extends its structure through a step-by-step logical sequence. Firstly, it defines economic bubble and bubble economy in general. Then it states the concept of real estate bubble and analyzes various economic effects that real estate produced in macro-economy on the basis of the description of the initial features of real estate bubble. In order to analyze the formation of real estate bubble, the author analyzes thefactors which influence the market price of real estate in one chapter and make an analysis of the formation of real estate bubble, which surpasses the basic value of real estate, based on the analysis above. These two chapters, with strong logical relation inside, are the key points of this article. The analysis of the market price of real estate is the foundation of analyzing the formation of real estate bubble. However, the factors that influences real estate price will turn into bubble through unconventional functions which will also lead the bubble to expand and burst. The analysis in these two chapters is the theoretical foundation of the article, which also establishes a base for analyzing bubble examination, early warning and policy direction that discussed in chapters coming next.Based on the analysis of the formation of real estate bubble, the author analyzes the testing criterion, early warning system and policy direction of real estate bubble. This part discusses the application of previous theories and it is another key point of the article. At first, it states the advantages and shortage of existing early warning system. After that, it sums up and creates an early warning system on this base. Ultimately, it puts the system to use Shanghai real estate market to get a basic judgment to the real situation.In the process of analyzing the bubble in Shanghai real estate market, the author comments on the analysis of index used in previous documents and creates "the interrelated analysis of economic variables and metrological", which uses econometric model to acquire some relations of the key variables connecting with real estate. I made an ADL of real estate supply and demand with statistics from August 1998 to the end of 2003 in Shanghai, and an ADL model of real estate price and demand. In this way, we can not only solve the problem of few data, but also observe the relation between major benchmarks in real estate market. The last chapter made a real-case analysis with the data of Shanghai real estate market. Shown by the result of "the interrelated analysis of economic variables and metrological" used in this article, the bubble level in Shanghai real estate market was still in an acceptable scope before 2003, but the article didn't make a metrological analysis for the real estate market after 2004 due to limited data. Instead, it made abrief analysis according to some of the data in 2004. The article believes the bubble problem in Shanghai began to be serious since 2004. Which is remarkable is that government's cooling-down policies began to take effect but the effects were limited. In 2005, both central government and Shanghai government promulgated some new measures and actions, which will further influence the average price of Shanghai real estate and the composition of bubble in real estate market. These measures will lessen the speculation and lighten the bubble composition in Shanghai. The analysis in this article is based on general principles of economics and discusses the system and reasons of the production of real estate bubble. In addition, it gain deeper conclusion using econometric analysis. The metrological analysis is a kind of interrelated analysis with many factors. I hope it can provide a new idea for other researchers.