Population Concentration, Bank Credit And Housing Price Volatility

Over the past decade, China’s housing prices showing a rising trend, particularly in Beijing Shanghai Guangzhou and Shenzhen, in these cities real estate prices had rose by 3-4 times, and has had a huge impact on people’s lives, which aroused widespread concern. On the causes of rising house prices, there are many different views in academia, including economic growth, the price of land, farmland protection system, the rise of real estate development costs, rising disposable incomes and expectations and other reasons. This paper presents a new point of view, mainly from the perspective of population concentration, namely large-scale gathering of the population in the city, caused the expansion of bank credit scale, thereby causing a rise in housing prices.Concentration of population is a comprehensive demographic index, due to a variety of economic, environmental, social and psychological effects of different age, gender, occupation expectations, people gathering in a particular geographic area forming a continuous convergence process. Concentration of population caused the expansion of bank credit by investment channels and consumer channels, on the one hand, a higher degree of concentration of the urban population will attract more investment in real estate development, on the other hand, there will be more people in the city to purchase a house, two together led to the expansion of bank credit scale. Through land development, real estate development and real estate sales stages, banks provide loans to real estate developers and home buyers, causing the rise in housing prices. Prices rising increases the investment needs of the market, the further rising expect of housing prices stimulate the banks and investors profit-driven mentality, leading to accelerated expansion of bank credit.Through the analysis of the 35 cities population, banks credit and housing prices during 2006-2012, proved a significant causal link between the three variables. Increased degree of concentration of population will cause expansion of bank credit, bank credit expansion will cause rise in housing prices, rising housing prices will lead to further expansion of bank credit. Finally, based on the empirical results obtained in this paper, we propose several possible policy recommendations, such as regulate population size of cities, control bank credit scale and stabilize housing prices.