The Measurement And Empirical Analysis Of China’s Real Estate Bubble

Since the Government proposed to further deepen the housing system reform to make the realestate industry as a new economic growth point in1998, China’s real estate industry has begun arapid development. Although during this period, because of some macro-control, the real estateprice grew ups and downs, the overall price was rising. In particular, during the period2004to2007,some cities’ housing prices rose rapidly. The rising rate was much faster than per capitaincome growth rate. Although due to the international financial crisis, China’s real estate pricehad come down in2008, it rebounded soon because of the economic recovery. Even in2010itwas affected by macro-control, the price was still high. Therefore, the real estate bubble in Chinais becoming an issue of concern and controversy.This paper uses the Ramsey Model to measure and conduct an empirical analysis of China’s realestate bubble of1998-2010. The reasult shows that, there was a slight foam in China’s real estatemarket during the fourth quarter of2003to the second quarter of2007, while there was seriourbubble during the second quarter of2007to the third quarter of2008. Then the price fell downand the bubble shrunk in2009as the effect of financial crisis. But the bubble re-expanded in2010. As the real estate industry plays a significant role in our national economy, once the realestate bubble burst, our national economy will be hurt badly. Therefore, after measuring theextent of the real estate bubble in China, this paper proposes a number of recommendations tocurb the real estate bubble.