Chongqing City Real Estate Bubble Measure, Causes And Countermeasures

The real estate industry in China since the new century has seen a rapiddevelopment, becoming one of its pillar industries. From2000on, the realestate in Chongqing gradually entered a booming period, exemplified by therise of commercial housing price and sales area, meanwhile, speculative andinvestment trading. Also began to rise substantially. With the boomingdevelopment in real estate industry in Chongqing, the bubble of real estateprice has increasingly become a hot public issue, with a debate focusing on“bubble theory” and “non-bubble theory” in the market. This paper starts withthis debate to research the bubble problem in Chongqing, aiming to verifywhether there is.a bubble in Chongqing and if the answer is affirmative, thenwhat the degree of this bubble is, because how much we know about thedegree of this bubble in the real estate market determines the correctness of thedevelopment plan and management policies we formulate for the real estateindustry.This paper firstly gives a brief introduction of the real estate industry inChongqing, showing clearly it has already become a pillar industry in drivingthe economy forward.One of the main parts of this paper is to have a empirical test ofproperty-value bubble in Chongqing through two levels going toindicator-tracing method and computing model method respectively. Forindicator-tracing method, it used “percentage of real estate investment in fixedassets in the whole society”,“ratio between home sales growth rate and socialretail sales growth rate”,“housing-price-to-income ratio” and the revisedversion to assess the health degree of the real estate market in Chongqing,whereas the computing model method examined the bubble degree through acomparison between calculated equilibrium price and the real price. Puttogether, it has concluded that the property price bubble began in2001-2004,swelled markedly in2005and2007, restrained slightly in2006and2008andworsened seriously from2009to2011. These two methods have refutedpowerfully the “non-bubble theory” in the real estate market.Next, the paper started with relevant theory on real estate bubble to definethe assortments, followed by the analysis of causes of the bubble in macroscopic, systemic and microscopic levels. It also analyzed themechanisms of operation and termination of the bubble, laying a foundationfor putting forward relevant preventive policies.Finally, guided by the industry theory and policy, the paper proposedcorresponding suggested policies to prevent the bubble and reduce its harmfuleffect based on the specific situation in the real estate market in Chongqing.