A Study On Interest Rate Liberalization And Real Estate Price

In July20th,2013,the People’s Bank of China announced the deregulation of thefinancial institutions lending interest rate to further promote the interest rate liberalizationreform. The lending interest rate liberalization will further unleash the markets’ power todeploy funds effectively,reduce financing cost of the enterprise,contribute to the developmentof the real economy.However,we need to note that although the People’s Bank of Chinaannounced the full liberalization of loan interest rate,but the personal housing loan interestrate floating interval does not change,still keeping the limit of0.7times the benchmarkinterest rate.This initiative will help our country to continue enforcing the differentiationhousing credit policy strictly,promoting healthy development of the real estatemarket.Furthermore,we can infer that in the interest rate liberalization reform,real estatemarket is the object needs to focus on.Theoretically speaking,the real estate industry is acapital intensive industry,any financial policy that changes the total funds and the allocationof funds will influence the real estate market.Market interest rates not only has a great impacton the cost of property buyers, which determines their investment decisions;but also affect thefinance cost of real estate developers.As a part of the market,developers’ demand for loanswill also affect the changes in the market interest rate trend.Therefore,the impact of interestrate liberalization on the real estate industry is needed to be studied.According the background that our country’s interest rate liberalization reformadvancement and the real estate industry’s pillar role in China’s economic system,firstly weintroduces the theoretical framework and connotation of interest rate liberalization.Andthrough the other country’s experience in such reform and China current reform process wecarried out a comparative analysis.Next,using vector auto regression model,an empirical studyof11cities in Shaanxi Province data will be made.The result indicates that: China’s currentinterest rate liberalization reform process have positive impact on the price of real estate.Andaccording to the theory of regional finance,due to the development of the economy, thefinancial industry and enterprise structure and other reasons,cities in better economicconditions or market system area are more significant affect by the reform.In contrast,areas which is less developed,it’s real estate prices are not sensitivity influence by the change ofrates.Meanwhile the results also showed China’s financial integration still has a biggap,financial institutions did not show obvious differentiation,the enterprise financingproblems still exist.Finally,this paper puts forward personal simple suggestions,that ourcountry need to further deepen the interest rate liberalization reform process.During theprocess,we not only need to ensure the stable operation of financial industry through theestablishment of supporting policies and regulation,but also pay attention to the relationshipbetween interest rate and real estate prices to ensure the healthy development of the nationaleconomy,and coordinating regional economic development.