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Housing Price in Chinese Property Market - Case Study Example

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This case study "Housing Price in Chinese Property Market" explores that price bubble is the result of a mismatch between the fundamentals and the outcome. For instance, if property price does not match with that of the core integrals of the property say then the resultant outcome is a price bubble…
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Housing Price in Chinese Property Market
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Download file to see previous pages Example of price bubble could be sought out from that of the Chinese example, which is structurally related to the domestic housing sector. Such a situation might arise only in case of a highly growing economy. Hence, the economic growth rate of a nation is one of the factors which could lead to a rise in the general price level. This is because a rise in the economic growth rate creates a certain level of optimism among the nationals and thus enhances their propensity to spend. Since investment is a factor that depends on the rate of growth in the previous period, a steep rise in one-period results to a rise in the level of investment in the following year, which assures a steady flow of income for all the coming years. In fact, any nation concentrates on stabilizing their level of income over the long run and thus, the governments of such nations themselves come forward to assure the same. This stabilization could be ensured only by increasing the level of investment in the nation. But macroeconomic theory suggests that a rise in the demand for commodity leads to a rise in the market price of the same. Thus, the economic growth rate could be considered as one of the factors which might lead to a rise in property prices at least theoretically.
With a rise in the level national income of the nation over time, there had been an increase in the demand for property in the economy. People had been running around with an objective of managing their wealth and increasing the quantity of their investment in the housing market. ...Download file to see next pages Read More
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