The Trend Of Financialization Of The Real Estate Industry

With the continuous development of human society, social economic model has changed from primary fishing, hunting and gathering economy to the feudal agrarian economy, and then the market economy represented by commodity production and circulation of capital. Economic monetization has become an irreversible trend.From 1940s to 1950s, the monetization ratio of western developed capitalist countries has developed to a relative high level, which was marked by that the monetization of these countries have already come into being. On this basis, the economic model has presented a trend of financialization. Under the economic financialization condition, liquidity of the assets has been strengthened, and efficiency of resource allocation has increased significantly. However, asset price has fluctuated sharply even in the stable money supply situation at the same time. For the combination of asset and finance, the influence of asset price fluctuation will be amplified through the financial system.The sharp fluctuations of asset price will be transmitted to all levels of the economy through the financial system, and shocked the whole economic system.Around the theme that whether the real estate bubble exists in China or not, the housing price issue has become a hot topic in academics recent years. Housing as a necessity of urban residents, its prices has risen rapidly since 2004, which has attracted the attention of government. The overtop rise of housing price will influence the social stability and harmonious society construction inevitably.As an important pillar industry of national economy, real estate can continuously promote China's economic growth. Therefore, government takes it highly while making economic policy. Nowadays, the investment scale and building number of real estate in China already play a leading role all over the world. Meanwhile, the concept of housing consumption is transferring from well-to-do type to comfortable type. Whether the real estate can develop healthy or not rely on the full use of financial instrument. It means that the capital of financial industry should be used to support the real estate industry, an excellent financial service system should be build and the virtuous circle should be established.The excessive rising of housing price will directly impact after 70 and after 80 who have already faced or will face the problem of buying a house. Nowadays, the rigid demand of purchasing power is weakening by the excessive housing price. According to the mechanism that supply and demand principle influences on the price, the real housing price should fluctuate within a reasonable range determined by rigid demand. However, the opportunistic demand for housing has led to a significant departure from the scope of this range, even much higher than most people's rigid purchasing power. Considering the very nature and Chinese traditional definition of "Home", more and more people prefer to become house slaves even under the condition of upholding high prices. Coupled with the continuous operation of speculators, house prices further depart from its true value. House is no longer simply a living space any more, not just the "Home" concept, but become a financial product.The financial authorities think highly of the real estate financial market for it playing an import role in national economy. Only real estate's financialization accompany with national laws and policies'development properly, that a healthy trading environment can be established. Otherwise, it will inevitably cause an excessive speculation and thus affect all aspects of the national economy. U.S. subprime mortgage crisis is a good example for this. In the progress of real estate's financialization in China, some issues, such as real imperfect market structure, singleness financial instrument and weak risk prevention, have become more and more conspicuous. Accordingly, it is particularly important to investigate on real estate's financialization in China.This paper studied on the concept of real estate's finincialization and its development, investigated the inevitability of the financial trend and the problems involved. According to the special national condition, we discussed the method that we can take to mitigate these problems in the progress of real estate's financialization, so as to standardize China's real estate industry and contribute to national financial theory. This paper consists of following five sections:Part one:Topic background, purpose and meaning, research method, abstract, basic structure.Part two:The concept and mechanism of financialization.Part three:The definition of real estate's financialization, developing progress, expression and necessity.Part four:Progress of China's real estate's financialization, the problem involved and potential influence of the current Chinese housing price bubble.Part five:Method that we can take to mitigate these problems in the progress of real estate's financialization.