Research On The Relation Between Real Estate Expansion And Financial Risks

With a new round of increase in real estate industry investment starting in 1998, real estate industry has played an crucial role in fueling economic growth and improving people's housing standard. As a funds-intensive industry, real estate industry cannot go without financial support., The past few years has witnessed a tremendous expansion of real estate market in China. However behind the situation of increasing demand and successive supply of real estate commodities, there is the full involvement and vehement expansion of bank credit in all aspects of real estate business. The role of rapid expansion of bank credit in real estate business and its accumulated financial risks have again become a nationwide concern.This paper attempts to reveal theoretically the relation between real estate and financial industries, that is, real estate industry cannot go without support from financial industry; financial industry sees credit for real estate industry as an important part of its business, and hence they depend each other for existence and promote each other. With all features of a sub-financial product, real estate has become an effective means for value guarantee and investment.The significance of research on the relation between real estate industry expansion and financial risk lies in the fact that the real estate industry fueled by financial industry has become a hotbed of speculation, which results from its unique price-forming device, and that real estate bubble has become increasingly obvious as a result of accelerated rise in housing price during the period from 2006 to 2007. The paper first tries to reveal the various elements that have aggravated financial risk, including government policies, internal factors of banks, and qualifications for real estate enterprises. And then it makes a special analysis and evaluation of major financial risks. Through citing Japanese cases where financial risks resulting from real estate industry expansion caused financial crisis, the paper sums up typical historical experiences for us to draw lessons from. Finally, the paper proposes a few measures for preventing and controlling financial risks in the real estate field in terms of state laws and regulations, macro-control, credit-policy adjustment, and environment protection.