The Effects of the Price Control Policy on the Real Estate Market in China

Table of Content

1. Summary

2. The application of the economic theories

3. The economic theories contribute to a better understanding of the reality

4. Conclusion

5. Appendix

6. Literatur

1. Summary

“I know people are living in cramped conditions, but we are resolved to set the real estate industry on a healthier course by the end of this term of government.” This address given by Wen Jiabao on February 27, 2010 reverberated, and jars the whole real estate, but no one knew how the real estate sector would be affected at that moment. When it comes to real estate, most of us would admit that the housing prices have been skyrocketing since many years. After the financial crisis 2008, the prices are rising even faster. A survey shows that the majority of the people thought that the housing prices had become unacceptably high in 2010. Undoubtedly, governments all over the world may face the same problem, but it turns out to be more difficult for China with the largest population in the world, as so many people are waiting to buy their own houses and so many developers are waiting to make fast money. Considering this situation, effective policy must be implemented. Therefore, in April, 2010, the state council had published a series of policies to slow down the soaring housing prices, among which, “the New Ten” become the most significant one. Our topic here is mainly based on “the New Ten”.

In second part of this report we will exemaine in detail the effects of the price control policy on the real estate industry in China in theory. Fom the the theoretical point of view the price control policy increase the supply. This means, when we apply ceteris paribus the supply curve shifts out, the quantity increase and the price decrease. Furthermore, the price control policy focused on decrease the demand. That means, when we apply ceteris paribus, curve shifts in, the quantity decrease and the price decrease.

Based on the theory we will explain in the third part how these economic theories can be applied in reality in order to contribute to a better understanding of the price control policy in china in reality. We will see that the theory does not fit the reality which means that the property price is still increasing.

In the last part, we will sume up the main points and state different points of view in order to evaluate the price control policy on the real estate industry in China.

2. The Application of the economic theories

The