An Empirical Study On Bubbles Of Real Estate In China

Since 2000,the industry of China real estate has been prospering, representing the proportion of the industry value added to GDP up to 9.4 percent in 2003 from 5.5 percent in 2000. Furthermore the prices for real estate items are being up rapidly and the speculative demand for real estate booms, which result in hot dispute over real estate bubbles. This paper starts from the issue, and proceeds to study empirically on how to measure bubbles, probability of bubbles' causes of the bubbles' existing and policies to supervising bubbles.The paper first defines bubbles and bubbles economy by reviewing the famous bubbles case in the history, and argues that bubbles are non-stationary rises of the capital price as against the theoretical price because of trader systematical rises expectation and inflation of speculative demand in fact, it is a phenomenon of price.Secondly, the paper detail explains the character or dummy assets in the real estate and bubbles blossom process, and thinks bubbles can be partitioned three phases, i.e. bubbles expansion period, bubbles persist period and bubbles burst period, and that hypotheses real states in China exist bubbles since 2004. It is bubbles expansion period. It is not bubbles persist period, of course, the hypothesis need test in the back.Thirdly, the paper has established two test models. The test model shows that the investor of the real states in China do not think their paying ability in the future, they only think the earnings by Using the real estate(mostly rent),purchase ability themselves and earning from the real estate price rises. regression equation shows: bubbles coefficient greater than 1 obviously (α₃=4.518663> 1) that show the real estate exist bubbles in China.Fourthly, the paper discusses the cause of real states bubbles in China. And the paper argues that the integration of macro-environment, institutions in real estate, and micro-factors. The macro-environment includes these factors: Growth of economy primarily depends on investment, expectation of RMB appreciation and excess liquidity and lower interest rate policy, and so on. The institutional limitation which are essential cause of bubbles of real estate in China comprise: Taking "sale" as emphases too much, undeveloped leasing market, lag of house safeguard institutions, untimely tax systems in real estate, defect of land policy and examination local government, etc. The micro-factors that are direct reason of bubbles involve : disorder of market, immature psychology of consumption, herd behavior, speculation, and otherwise.Finally, the paper claims that the policy on bubbles should abide by the guideline of "not batter but control". The measures can be as following: Exchange rate policy, interest rate policy, perfect of the systems of house safeguard, development of leasing market, reform of the tax systems in real estate, perfect of land policy, ensure of the market in good order, strengthen of publicity of market information, enhance of the cost of speculation.