| Recent years, the real estate industry in our country develops very fast and plays a more and more important role in economy. From historical perspective, there have been instability in financial system triggered by real estate markets and transferred by banking system. Therefore, it is very important to study the real estate industry as well as the relationship between real estate market and banking stability. The study will not only improve the development the real estate industry and also contribute to the banking and even whole financial system.This paper focuses on the current situation of real estate market and bank risk in our country, investigates the relation between the housing prices and bank stability, and suggests how to improve the banking stability, reduce the financial risk and ensure the stable development in financial system from real estate market. Compared to previous researches, this paper has a certain degree of innovations in the basic theory, theoretical model and breadth of data.This paper first summarizes the previous literatures on housing price, bank stability and the relation between the two. Secondly, this paper analyzes the current situation of the real estate market in our country using the data from January 1999 to March 2010 and the error correction model. From the empirical results, we can see that the housing price and the price departure are the key factors to explain the changes in real estate prices. GDP, price of land are positively significant. Population growth has insignificant coefficient in the model.After the analysis of real estate model, this paper goes over the development of the bank system since the economy reform. We find that the main factors of bank risk are high proportion of bad loans, the changes in exchange rate policy, financial liberalization and financial innovations, etc. Based on those issues, this paper constructs a theoretical model about the effects of real estate prices on bank stability, which analyzed how the real estate prices influenced the bank stability from a theoretical point and using quantitative method to analyze the government owned banks. We use panel data to investigate the relationship between the real estate price and bank stability. The results show that the market capitalization, or size, of the bank is insignificant for bank return volatility. Bad loans have positively significant effect on bank return volatility: the more bad loans, the higher volatility, and higher return volatility.The changes in real estate price have negative effect on bank stability. The long term housing price volatility is statistically significant at 5% level, which is a big threat to the bank stability. However, the short term price changes are not significant statistically, But this study shows that, if there are constant risks in the bank's own systems, the fluctuations of real estate prices would have a great impact on the bank stability. In the end, taking all scenarios of the current economy situation in our country and all the potential risks in real estate and bank system into account, this paper provides some suggestions. For example, build the multiple financing systems in real estate industry, improve interest rate marketization, enhance the control for real estate market, improve bank prevention system, enhance the bank supervision ability, and improve transparency of the policy and reasonable guide the public... |
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