Measurement Of House Bubble In The Critical Cities Of China

Real estate industry has always been the pillar industry of economic development of China since the reform of housing system in 1998. Housing bubble emerges following the remarkably growing of housing price. Both the burst of Japanese housing bubble and outbreak of subprime lending crisis of USA bring unimaginable impact to the global economics. Therefore, learning a lesson from these countries is an effective way to avoid that China's Real Estate appears bubble or bubble burst if it has existed and the negative influence which it brings. This will contribute to health and stable development of China's Real Estate. So far from 2010, the government has carried out several monetary and fiscal policies to control the housing market which indicate the determination and strength. Therefore, studying the housing price bubble has indubitable theoretical and practical significance.Through a house price-rent model and a Kalman filter technique, this study estimated the dynamic route of house price, using the data of Beijing, Shanghai, Chongqing, Tianjin, Shenzhen and the nation. Using a VAR model, we analysised the impact factors of housing bubble of the nation and gave the results of generalized impulse response function analysis and variance decompositions. At present, domestic scholars hadn't used this method to measure the housing bubble. This study drew the following conclusions:Firstly, house price had been increased in each city and the nation since 2003. Even though the characters of housing bubbles were different in different cities, their movements were consistent with the price trend. By calculating the time difference correlation coefficient, we found they were coincidence indicators in other five models expect Shanghai and almost all peaks can correspond to valleys. Bubble of Beijing was under 5% before 2006, nearly zero and rose rapidly up to 27.5% in September2008. There's a decrease after that. In the August of 2009, the bubble reached the bottom and was 8.6%. Then the bubble rose to the highest point 32.8%. The bubble's trend showed the character of "N". Shanghai was divided into two time periods for analysis. During 2003 to 2008, there's a larger magnitude of the changes and there appeared the figure of "three peaks and two valleys". During the later 2005 and the early 2006 the bubble was nearly 30%. and showed the figure of the inverted "V". In the second period, the bubble rose sharply after the July of 2009. and reached a peak in the April of the 2010. and then the bubble decreased slowly. To the later 2010. the bubble was still at a high level of 24%. The bubble of Chongqing was always below 2%. Although it still increased after 2009. the peak value of the bubble was only 9.5%. Chongqing was the smallest of bubble in the model. The bubble trend had a figure of a inverted "V" Tianjin, Shenzhen and all the nations'bubble was similar with Beijing, the difference is that the gap between Tianjin and Beijing is the least. Shenzhen has a lower level, and all the nationwide had the lowest level. In the June of the 2010. the bubble of the nationwide reached up to 21.6%. All of the three showed a figure of a inverted "V". The bubbles of Tianjin, Shenzhen and the nation were almost the same with Beijing. There still existed some difference. Bubbles of Tianjin nearly equaled that of Beijing. Shenzhen took the second place and nation minimum.Secondly, results of generalized impulse response function analysis indicated that interest rate and CPI had negative influence to bubble, whereas bubble, industrial output and domestic loans from investment funds in real estate development had positive influence. The size and positive or negative effects of the housing bubble from different variables impulse different. This provided the basis for carrying out government policy and controlling the real estate market.Results of variance decompositions indicated bubbles themselves explained mostly, nearly 70% after 36 periods while the sum of other four variables could explain lowly. Therefore, they were all effective methods that government guide investment correctly in the real estate market to enable investors to have a reasonable expectation and control interest rates, finance institutions control mortgage.