The Interactive Relationship Between China’s Real Estate Bank Credit And Real Estate Prices

Since the reformation of our real estate market in1998, China’s real estate market has developed of very quickly. The real estate has become a pillar industry of China, which has played a pivotal role in promoting China’s economic growth. But at the same time, as a necessity of the inhabitants, the excessive rise of real estate prices in recent years has become the focus of attention.The government also has been taking appropriate measures to regulate the real estate prices. The real estate prices rise too fast, even faster than the purchasing power of the general population, thus have bubble tendency, which has caused some adverse impact to the community.On the other hand, as one of the most important monetary policy, bank credit is also an important source of funding for China’s real estate market. What’s more, there is a synchronous rise between banks’ real estate credit and real estate prices. So, what is the relationship between the banks’ real estate credit and real estate prices? Is there a causal relationship? Can we use credit policies to influent real estate prices? With all these questions, this paper takes banks’ real estate credit as the starting point to study its interaction with the real estate prices, both in theoretical research and empirical test.After review and summarize some foreign and domestic literature,this paper firstly introduced some basic knowledge of the real estate, real estate prices and bank credit, as well as the development status of China’s real estate market. On this basis, through the partial equilibrium model and incomplete information dynamic game model, this paper analyzes the interaction mechanism between banks’ real estate credit and real estate prices. In order to verify the interaction between them, this paper has conducted an empirical test, including the determination of both banks’ real estate credit and real estate prices by unilateral co-integration test and the interactive relationship with a VAR model test. The test results show that there is a mutually causal relationship between banks’ real estate credit and real estate prices. And also, the impaction of real estate development loans on real estate prices together with the impaction of real estate prices on real estate development loans and individual mortgage loans is much larger than that of individual mortgage loans on real estate prices.Based on the theoretical analysis and empirical test results above, combined with the current development status of China’s real estate market, this paper presents some policy recommendations, hoping to make some contribution to this field of study.