Introduction of real estate bubbles

As we all known, there are many different kinds of bubbles in our economic world. So today, I will firstly focus on real estate bubbles to study. The definition of the real estate bubbles is difficult to state but most people have an agreement on three categories. From the point of price, a real estate bubble is an abnormally high trough-to-peak price rise. What cause this phenomenon? Maybe there is a prolonged increase of income in a period. The second definition is that the price of asset in question to exceed its fundamental value by a large margin. If the participants have an expectation of rapidly increase price of asset in the future, they will buy some assets to invest. However, if prices at any given time reflect all available information, a bubble cannot exist because the houses are all efficiently priced. The last one concentrates on the price of assets to its long-term equilibrium level.

After realise the definition of the real estate bubbles, I will explore the reason of the bubbles. Real estate bubbles may not occur without banking crises. The two economic phenomena are correlated with each other. I want to have an emphasis on the banking system and banking behaviour. The rise in the prise of real estate will contribute to the increase of bank capital. This increases the supply of credit to real estate industry and vice versa.