Research On The Price Of Real Estate:Based On Demand

China’s real estate industry has developed rapidly with the country’s industrialization and urbanization accelerating and its sensitivity and influence is increasing. As a result, the real estate industry gradually becomes one of pillar industries in national economic development. However, housing prices continue to rise since2003.The real estate prices rose rapidly since2005and has been experiencing a second soaring-up ever since2009. Finally, the skyrocketing price goes beyond the people’s affordability and the government’tolerance, making housing problem not only an economic problem, but also a political issue. From2005, the government has implemented further macro-control efforts and introduced a number of measures to deal with the problems arising in the real estate industry. What is difficult to understand is that while policies are rolled out, the prices continue to rise, even to an unreasonable level, thus making housing prices a hot issue for academic research in recent years.In this paper, we take the situation of real estate market and the effects of strategies of price control as a starting point to discuss what exact time points are when the periodical policy of the phenomenon immunity or partial immunity, and explore the determinants of real estate prices based on analysis of the current economic environment. We also research into the relative importance of supply and demand and their components in the real estate price formation process so as to find out the key factors of real estate price. We also conclude that the main reason for unmet supply lies on its lagging and weak elasticity properties and supply constraint is a widely acknowledged fact in China’s real estate market. Both the release of the rigid demand and social capital investment needs contribute to the irrational real estate prices rise.Secondly, we point out that it is the demand force that pushes the market price to rise and further subdivide demand into subcategories of consuming demand and investment demand on the basis of practical and theoretical analysis. Then, we build a model of real estate prices co-driven by consuming demand and investment demand and select the GDP, urbanization rate, disposable income as explanatory variables in consuming demand, select consumer surplus funds, fund size, down payment requirements as explanatory variables in investment demand. After running the model, empirical outcomes show that the demand of investment in2009has a strong explanatory power for soaring housing prices hence an ideal is put forward that by controlling the investment demand, we can effectively stop the rise in housing price.Thirdly, this paper makes suggestions about economic adjustments in real estate market from the demand perspective, which is that we should make full use of the leverage of interest rate, implement reasonable tax system, reinforce credit management, put strict restrictions on foreign hot money into the real estate market and direct investment, so as to effectively control the demand for real estate investment and let consuming demand be the determinant.In the end, we pointed out the limitations of our study and discuss prospective research.