The Impact of Interest Rate Adjustments on Real Estate Prices in China and Japan
Abstract
This paper explores the impact of interest rate adjustments on real estate markets in China and Japan, highlighting how monetary policy interacts with institutional structures and supply-demand dynamics, and compares the development trajectories of their real estate markets at the same time. In China, declining interest rates have fueled high property prices and low rental yields due to persistent supply-demand imbalances, particularly in major cities. This has contributed to economic disparities, income inequality, and financial risks. In contrast, rising interest rates in Japan have suppressed real estate activity as higher mortgage costs, and weakened export competitiveness, ultimately prolonged the recovery from its past real estate bubble collapse. This paper concludes that interest rate policies alone cannot resolve structural challenges in real estate markets. A broader policy framework is needed, incorporating industrial restructuring, population mobility, and fiscal measures. In China, key priorities include balancing land supply, enhancing population mobility, strengthening the rental market, reducing fiscal reliance on real estate, and improving housing affordability for low- and middle-income groups. The government must also address speculative risks, market adjustments, and economic overdependence on real estates. In Japan, population policies and property market reforms are the key to support its long-term recovery.
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