Assessing Real Estate Market Dynamics in Hangzhou: A Principal Component Analysis of Bubble Indicators and Policy Implications

Abstract

Real estate is the leading industry in our national economy and has a degree of correlation with other industries; its healthy and stable development is of great significance to economic development, the adjustment of industrial structure, and the improvement of people’s living standards. But after2004 the Chinese real estate market appeared to be overheating; prices rose too fast, rigid market demand-supply shortage and the invalid supply excess frequent contradictions, the local government became heavily dependent on land finance, the vacancy rate remained stubbornly real estate development overheating problems emerged in endless, causing the attention of the society and the government. The collapse of the real estate bubble will cause a fatal blow to the development of our country’s economy. Research on the real estate bubble will help us adjust the overall economic operation better. In order to accurately grasp the possibility of the existence of the bubble in Hangzhou City, we need to establish the corresponding indicators. This article is divided into four parts. The first part describes the real estate bubble concept and method of measurement. The second part mainly analyzes the real estate bubble generation mechanism of five indicators. Then, a bubble generation mechanism analysis was conducted; the third part was selected from 2001 to 2015, and the Hangzhou bubble appraised five indicators. Then, a comprehensive analysis of the real estate in Hangzhou City by using the method of principal component analysis; the fourth part is this article from the land, finance and government management on the future direction of development of the real estate market of Hangzhou proposed.