Abstract: The ever expanding housing price bubble has become the largest“grey rhino”hidden in Chinese economy. Based on the expected equilibrium price model of real estate, this paper makes a scientific measurement of China’s urban housing price bubble. On the basis of theoretical analysis, it takes the panel data of 35 large and medium-sized cities during the period of 2000-2017 as the samples to conduct an empirical analysis of the dynamic relationship between China’s urban housing price bubble and financial stability with the PVAR model. The findings shows that the impact of housing price bubble on financial stability can support the price deviation hypothesis, in the eastern cities and the cities with stronger financial support, the housing price bubble has a greater destructive effect; moreover, compared with bubble expansion, the reduced housing price bubble has a stronger impact on financial stability. In this regard, the real estate regulation and control should adhere to the differentiated regulation measures according to the real conditions of the cities, squeeze out the bubbles in a fine adjustment way, guard against the risk of“two way imbalance”in the implementation of regulation policies, speed up the establishment of a long-acting housing system with multi-subject supply, multi-channel protection, and the double way of rent and purchase.

Key words: housing price bubble; financial stability; PVAR model