Download Research on Using Requirement Factor Model Method to Ascertain

Research on Using Requirement Factor Model Method to Ascertain
Real Estate Froth Degree
WANG Hong
Pingdingshan Institute of Technology
[email protected]
467001
Abstract:The real estate froth hazard has a close relation with the real estate froth degree .Only through
accurate judgment of the real estate market whether has the froth, as well as the froth degree, can we
promptly take the corresponding measure to carry on the regulation to the real estate market. Therefore
the real estate froth research has the important practical significance to the continually stable and health
development of the national economy and the real estate industry. Through the analysis of the real estate
froth and the real estate speculation and embarking from the non-speculative and the speculative
demand factor which influence the real estate price, this article carries on the regression analysis using
the real estate congenial price mathematical model to determine the real estate froth degree, thus we call
it the demand factor modeling.
Key Word: the real estate froth, the froth degree, the standard price, model, the proper method
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Real estate froth, as a kind of cosmopolitism problem takes on determinate "infectivity". From real
estate froth, in Japan, in American, in 1990 to the financial crisis in S.E. asia, in 1997 foamy infectivity
in developed and developing countries had got exemplify. Lucubrating real estate froth will be help us
to hold China real estate marketable trend.
Between more than 20 years from recovery to these, realty business developed fast with a rush and had
great achievement. Since 1980, Chinese city population had grown up to 167
and floor surface of
town dweller enlarge 25 per capita from less than 5 ,creating nonexistent wonder in urbanization
history all over the world in the past more than 200 years. And importance and effect of realty business
throw into relief among national economy. But realty business on the developing process exposed much
lucubrating problem. In 2004, in some city, in Chinese, real estate price short-term accelerating jump
triggered off real estate foamy attention to higher level and each side. Chinese real estate market, after
all, has the froth or not
this is a controversial focus all circles for several years. For the moment, it
formed both diametric opinions, one thought that real estate froth exist, taking the lead of Chinese
Academy of Social Sciences internationally some research community consider in our country real
estate froth already came into being, and foretell froth should blight at not long hour offshore someone
even consider Chinese be confronted with danger of real estate froth breakdown another believe that
real estate froth and real estate superheat were nonentity in our country taking the lead of the specialist
of ministry of construction P. R. China. But in fact, froth discussion itself has pubescences because the
opinions of acceptance and rejection criteria of real estate froth varied, inland for the moment much
data didn't take on comparability and stringency. On this condition, both opinions were lack of sufficient
glister. So, how judge on the nose real estate market, whether presence froth as well as foaming degree
for in time adopting different kinds of corresponding measure to regulation and control it it is great
importance of promoting national economy and realty business spread ,stabilize and health
development and ameliorating the lodging condition of more denizen. Through the analysis of the real
estate froth and the real estate speculation and embarking from the non-speculative and the speculative
requirement factor which influence the real estate price, this article carries on the regression analysis
using the real estate congenial price mathematical model to determine the real estate froth degree, thus
we call it the requirement factor model, in the hope of deepening discussion about real estate market
froth.
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Review of real estate froth degree determining method
In developed market economy abroad, the research of real estate froth estimate approximately is divided
into two kind: First is analyses from the aspect of pricing of real estate. found various computation
module of basic price of real estate. contrast real price with basic price to measure degree of the froth.
the second is analyses from the aspect of credit of real estate. it designs different kinds of indices to
measure the degree of real estate froth. Owing to imperfect on regime and market statistics system in our
country, the computation module and indices abroad cannot apply in domestic.
The research on real estate froth estimate in domestic is immaturity. There are four research methods on
it. the methods are as follows: theoretical price method, Monte-Carlo method, market modification
method and advanced warning index method. Theoretical price method (Zhengxin Huang in 2002) is
that the basic worth of physical capital is determined by the manufacturing cost plus circulation cost
superadd social average profit of the assets or commercial product. It isn't determined by the yield of
reality capital. Monte-Carlo method (Lin Liu etc.2003) sets up three indices, as ratio of growth rate of
real estate price and real growth rate of GDP , ratio of room rate and income, ratio of mortgage charge of
house and monthly profit of denizen. Using the average of three indices acts as coefficient of froth
estimate of real estate. In 2004 Jingkui Zhou thinks that the price of real estate is constituted by use
value of real estate and PV of present value income of anticipating capital gains of real estate. Then
found a computation model concerned with denizen DI, loan rate and real growth rate of foretime real
estate price. Generally, there are three vice on it. As follows: first, some estimate indices is ambiguity.
the numeric of estimate indices merely have relatively sense, cannot determine the degree of real estate
froth. second, lacks of syntheses estimate indices and authority and systemic statistical data. third, some
indices have no relationship with estimate of real estate froth. they are estimate indices of real estate
booming. The indices is overabundance and cannot use in practical application.
II
Real
estate froth and analyses of real estate speculative
Economy froth is a Phenomenon that fictitious capital excessively increases and relevant negotiation
prolonged expansion. The increases disengage the rose of real capital and the growth of industry
department. Financial instrument and the price landed of property rise rapidly and speculative
transaction go with a bang. Modern economics defined froth as assets price durative swerve away from
its functional value (use value) first it was abidance rapid rising course or state (froth melt) when assets
rate disengaged market foundation, second, it was the part that assets prices subtract to the market
determinative just price part. Here, assets functional value or use value or market determinative just
price part, are all one notion, we were distinguished as standard price. The decisive cause conduced
economy froth, was virtual demand or speculative demand speculative demand, and virtual demand
overexpansion resulted in price level non-stationary rose, relative to its standard price, "buy" was in
order to "sell" and make a profit for agio.
Real estate economy froth was that real estate price disengaged market fundamental durative advance,
caused by real estate speculation it was the part that real estate assets prices tower its standard price. In
the abstract, any merchandise all have probability of occurring economy froth, and it is different that
each merchandise froth generation chance probability and its incidence to national economy. In
accordance with practical experience analyses of nation and regional of the world, stock and real estate
are up most of generation froth probability, so real estate and stock are froth economical prime bearer
or ”frequently occurred region”. The principal causes of giving birth to real estate froth was that home
ownership scheme is society button-most welfare require. the housing conditions require of people was
endless; whereas, real estate was directly and closely relate to plant and work condition's ameliorate,
correlating with enterprise development. On account of territorial finiteness, persons are in existence
very optimistic anticipation to real estate prices jump. While economic development got off to rose time,
real estate demanded flush, and it made land resources, in particular land resources supply, was very
finitude in down town, thereof it resulted in real estate anticipation rise in price, disagreeing with
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practical situation of market, and made much non-real estate enterprise and private investor put much
money into real estate, in the hope of obtaining benefit of price hike, and it accelerated real estate price
up. They hardily pledged purchased real estate to bank debit for investment in real estates while
everyone observe that real estate price only rose and not drop with hardily withal purchase to. Because
real estate was realty and easiness attachment, keeping and realize whereas price only rose and not
drop the bank believed such loan risk no room to swing a cat in and sometimes over optimistic
estimated pawn value under profit driving and it strengthened financing ability of putting money into
real estate of credit giver and ulteriorly aggravated real estate prices' hoisted and industrial outspread.
So real estate speculation purpose demand was related to territorial scarcity, that is to say, the purpose
of buying storey was only turn regrate , but not live, and if this kind of behavior became upsurge colony
action, it was difficult of suppression, real estate froth came into being.
It was a kind of specific merchandise and its supply and demand particularity consisted in serious
restriction in the real estate. In three primary nutrients(capital, work force and soil) elasticity of supply
of soil was least in real estate, supply elasticity was less and demand elasticity was major. Relatively,
real estate supply took on major rigidity, and amplitude of variation was finitude and real estate demand
has enormous oscillation space and this was principal aspect of determining real estate price. So, in
accordance with signification of real estate froth, we could start from requirement factor of real estate
price, and analyzed real estate price formation in terms of real estate speculation price mechanism .
In terms of this clue real estate price value was composed of two parts (1) real estate use value
was earnings rate ,from which real estate owner acquired in use, namely real estate "standard price". To
the house type, real estate use value was satisfaction and enjoy acquired from using and consuming
house to the commerciality type, it was equivalence hire that did not contain anticipated price change in
use. Under this condition, anticipate number of capital gains both were zero. (2) present value of real
estate assets anticipate capital gains, was fluctuate amount of capital gains ,induced by anticipation price
change , namely real estate "speculation price". The formula is:
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Pt = Pt 0 + Pt m = Pt 0 + Pt m+1 / (1 + it )
（1）
， P is the price of real estate in t period； P is use value of real estate； P is present
value of expected capital gains of real estate； P is expected capital gains of real estate in next
period； i is interest rate of real estate in t period。
In the formula
0
t
m
t
t
m
t +1
t
0
Real estate "standard price" Pt in equation (1) is real estate price when expected capital gains is zero.
It is reputed that it is relative to income per capita y, loan rate I, scale of urban population Φ.
The relation of real estate price and per capita income was positively correlated, when denizen per
capita income was higher, denizen disposable personal income was more and real purchasing power
was more powerful. The influential factor of real estate price was per capita DI, on account of
equidirectional and synchronous between per capita income and it, even them hardly in accuracy told
difficult of them so we could replace it with per capita income .while per capita income increased the
life level should came along and his live and active spatial require also improved at finally, then real
estate price soared.
As a whole, real estate price assumed negative correlation relation to lending rate, it took effect to
"standard price" and present value of anticipate capital gains. While loan rate went up, on the one hand,
people would increase mortgage loan outgoings and cut DI, so reduced real estate consumptive on the
other hand people also depressed the anticipation that real estate went up and decreased real estate
invest appetite. these both led to real estate lower price.
Real estate price assumed positively correlated positively correlated relation to urban population scale φ.
on the one hand, urban population scale was larger, and its diffusibility impact more broadly, and gather
degree of culture, finance, politics and imperial box and pin deliver establishment etc was higher. this
kind of gather created treasure, only it behave as convenience of substance and mental life, but not folk
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income. this was valuable, just as it would like to remove to flourishing point, bidding a high price, for
communication more convenience and life more convenient. Population gather made real estate price
level improve. on the other hand while urban scale enlarged, by reason of confinement of land area,
population density certainty increased. it induced such as building higher, and communication
multilayer development etc. these made crowd cost and brought real estate unit construction cost
increase and price improve.
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Therefore，"standard price " of real estate
P = f (y , i , Φ )
（2）
Pt 0 can expressed as:
0
t
1
t
t
t
m
Expected capital gains of real estate in next period in equation (1) Pt +1 is the speculative price of real
estate. According to taking a profiteering attitude of positive feedback mechanism of investors of real
estate it is reputed that the price is relative to the growth rate of real estate price in previous period.
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m
Therefore, speculative price of real estate Pt +1 can be expressed as
m
t +1
P
= f 2 (g t )
（3）
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Substituting equation (2) and (3) into (1) composing model of speculative price of real estate can be
expressed as:
Pt = f1 ( y t , it , Φ t ) + f 2 ( g t ) / (1 + it )
4
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III Determination method of froth degree of real estate has two steps:first is to
establish computation model of "standard price " of real estate and confirm
"standard price " of real estate. second is to confirm the froth degree of real
estate.
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1
To establish computation model of "standard price " of real estate and confirm "standard price " of
real estate.
According to equation 4 we can found approximately linear equation as follows:
Pt = a 0 + a1 yt + a 2 it + a3 Φ t + a 4 g t / (1 + it ) + u t
5
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Here "standard price" of real estate is
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（6）
Pt = f 1 ( y t , it , Φ t ) = a 0 + a1 y t + a 2 it + a 3 Φ t
0
Speculation price of real estate is:
（7）
In the previous three equations；
Pt m = a 4 g t / (1 + it )
Pt -- the price of real estate upper in t period;
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yt -- per capita income of the region in t period
it -- rate of short term loan in t period ;
Φ t -- the scale of population of the region in t period;
g t -- real growth rate of price of real estate in t period
u t -- random error.
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Substitute the several series data of price of real estate , income per capita, rate of short term loan, scale
of population, real growth rate of price of real estate into equation (5). proceeding linear regression
analysis, found out the numeric of 5 parameters: a0 a1 a 2 a3 a4 .then substituting relate
parameter values and explanatory variable into equation(6), we can get the standard price of real
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estate Pt .
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2 Acceptance and rejection criteria froth degree of real estate K
froth degree of real estate is a Relative conception to "standard price" of real estate. definition is the
ratio of the difference between real price and standard price of real estate and standard price of real
estate. As follows:
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K = Pt − Pt 0 / Pt 0 × 100 100
Economic froth of real estate has both advantageous and disadvantageous. Moderate economic froth is
beneficial for flourishing economy, promoting competition, impulse development of real estate and
increasing of national economy. Such as: tiny raising of price of land; Steadily raising of room charge,
Development investment of real estate higher than growth rate of society capital investment; supply of
commercial house slightly exceeding market requirement etc. But we must soberly recognize that real
estate price has the tend that exists more froth during socioeconomic developing time. If froth degree
was oversize it is harmful that causing borrowed boom. The key is controlling it in a moderate range
avoiding drastic fluctuation. Hereof gave out the following acceptance and rejection criteria of froth
degree of real estate
If K 0 illustrates that forth exists in real estate market if K 0 illustrates that deflation exist in real
estate market if K= 0 illustrates that market condition of real estate is ideal.
When K 0 according to the value of froth degree of real estate. We can divide real estate market
into four situations: safety area, warning area, dangerous area, grievous dangerous area.
If K
0 10
real estate market is in safety area;
If K
11
20
real estate market is in warning area
If K
21
30
real estate market is in dangerous area
If K 30
real estate market is in grievous dangerous area.
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IV The explanation of problematical relative to requirement factor model
method
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1 real estate value took on exceptional characteristic by reason of representative regional market so it
has not practice sense to ascertain real estate froth degree all over the country. So we must according to
the region and the real estate style that is to say different city live or trade type real estate etc, we
respectively measured and analyzed for in accuracy ascertain real estate froth degree. On the basis of
the above measurement result it was completeness possibility that in some floor price supreme or
anticipate floor price amplification maximal, real estate froth was not most serious and it was also
completeness possibility in some cities real estate froth was structural nothing but distinctness occurred
in top grade house and commerciality real estate.
2 real estate froth degree was average one in ad hoc expeditionary city and in given period, on the base
of requirement factor model method. It was fit with average real estate froth, by reason of it was
durative rose course in a given period. 5 parameters need be ascertained in the method in general, it
need 10 time-interval real estate data. If we choused month as time-interval unit, and proceed regression
analysis, using relevant data from January to December in certain city in certain year, we can get real
estate froth degree here; if we choused season as time-interval unit, and proceed regression analysis
using relevant data of real estate in 10 12 seasons from BOY in certain city, we can get real estate froth
degree of these time-interval this city.
At last, because of lacking of history and latest data relative to every municipal real estate, empirical
research cannot carry out, and cannot indicate real estate froth generate condition on the base of
aforesaid requirement factor model all over the country, and these will just be pursuit in future.
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Main References:
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1
Kang Airong Market economy healthy development moral soul - integrity mechanism
Economic Forum .2004.13
2 Du Lanzhu Discusses the establishment and improvement of the system that to protect integrity
of the accountant.
Economic Forum .2004.12
3 Zhang Yueqing The government has to pay great effort to make up for malfunction of the real estate
market caused by monopoly focus of the real estate net 5 May 2006
4 National Development and Reform Commission: the land may not be the highest bidders in the future
South of Yangzi River Times 29 August 2005
5 Lijin Cui Debate of the Model of Real Estate Development: Removed Land Price from House Price
Economical Reference Newspaper, 11 April 2006
6 Du Meng. Original Sin of the Real Estate Market Urban development, March 2004
About the author: Wang Hong, female, born in May 1972, Associate Professor, Master of Northeast
University of Finance and Economics, working in engineering management department of Pingdingshan
Institute of Technology and mainly engaged in construction and real estate Economic Research.
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