Research on the Impacts of Real Estate on Economic Growth: A Theoretical Model-Based Analysis

Abstract

As the pillar industry of China’s economy, the real estate sector has a significant impact on macroeconomic growth. We assume that the first stage of economic actors’ working lives is a low-income one, while their second stage is a high-income one. Then, relying on an Overlapping-Generations Model, we analyze how, via real estate, the behaviors of different income groups affect the macroeconomy. The results show that when the supply of real estate market fluctuates then this has an impact on economic growth, but the extent of the impact depends on the relationship between the real estate and the consumer markets. We also find that when economic actors more greatly prefer their current situations of well-being, no matter whether there takes place or not a new increase in real estate stocks, a negative correlation will exist in the relation between real estate stocks and their prices. Lastly, we come to the conclusion that increases in property taxes can effectively reduce housing prices, but the impact of transaction taxes on housing prices can still not be determined.