The Study Of Relationship Between Bank Lending And Property Price In China

In recent years, with the deepening of housing reform and improvement of the level of urbanization, The real estate industry developed rapidly, the actual completion of our real estate investment and real estate sales increase quickly. With the rapid development in the real estate, the property prices have been quite strong over the last decade. bank lending has played an important role in the roaring property prices. From international experience of a historical point of view, property booming is often accompanied by the expansion of bank lending. The national average sales price of real estate increase from 2053 yuan/square meter in 1999 to 5,034 yuan/square meter in 2010,Real estate loans in China grows from 313.6 billion yuan in 1998 to 9 trillion in 2010.The property prices rise simultaneously with the bank lending, what is the relationship between the property prices and the bank lending? If there is an interaction between them, what is the interaction mechanism? Therefore, this is an interesting topic to study the relationship between the property prices and the bank lending. The study has important theoretical and practical significance for our preventing the real estate bubble and real estate credit risk.This paper selects bank lending as an entry point for research, we use Co integration test and error correction model to analysis interaction between bank lending and property prices. Based on descriptive analysis to China’s real estate and bank lending, this paper analyzes the causality between the real estate prices and bank credit qualitatively and quantitatively. we Hope our study can help us to understand the price fluctuation of real estate, so as to provide useful suggestions about Real estate regulation and financial risks management.This major research work includes the following four components.1) The background and significance of the topic are analyzed. Literature on the relationship between bank lending and property prices、real estate bubble and bank credit are reviewed. Drawback in existing research in China on property prices and bank lending. Feasible research directions are given.2) A preliminary description of real estate price theory, we analyze the prices of real estate properties and characteristics of property, and introduced the relevant factors affecting the real estate prices, then analyze transmission mechanism of the interaction between property prices and bank lending. bank lending may affect property prices via various liquidity effects, Property prices may affect bank lending via various wealth effects. We establish a partial equilibrium model in the real estate market to investigate the causality between the property prices and bank lending.3) We use cointegration tests and error correction model to analyze the relationship between bank and property prices. We select the national average sales price of real estate and bank real estate credit supply as variables, select the 2007～2010 years of monthly data for cointegration tests and found that supply of bank real estate credit and property prices exist stable equilibrium relationship for the long-term, through the error correction model,we can see that in the short term, the current changes on the supply of bank lending has no significant effect on property prices, but lagged a change in bank lending will affect property prices, indicating that credit transfer has a certain lag. By Granger causality test,we found that bank real estate lending and property prices Granger causality each other,this prove there is interaction between them.4) Finally, in based on the previous chapters, we proposed the relevant policy recommendations, including the adjustment and improve the bank credit policies, and control real estate credit, adjusting real estate loans direction. differential lending policies, strong credit review, adjustment of the real estate industry structure; expand direct financing channels of real estate; perfect room real estate market information disclosure system and regulate the real estate market order. Results of this study and to propose future research directions.This innovation is reflected in the following four areas:(A) This paper focuses on bank credit and property prices and the underlying mechanisms of interaction. While real estate prices on bank credit and the research has been a lot, but mostly for macroeconomic, bank credit, the correlation between property prices, and mostly one-way contact and influence, and less related to bank credit and real estate prices mechanism of the inner.(B) In the theoretical research, not only from the perspective of the general economic performance of bank credit and the interaction between property prices, but also through bank lending and property prices will be incorporated into the partial equilibrium model to the derived equilibrium state best real estate prices.(C) Empirical research innovation. the actual situation in our country, we selected long-term residential consumer loans and real estate development loans as the bank’s credit support.Overall, this paper gives a number of new research findings about the relationship between property prices and bank lending, which is meaningful for the development of real estate and finance-related policies to promote the healthy development of China’s real estate market, prevent financial credit risk, achieve social harmony and stability.