The recent ten years have witnessed the boom of China’s real estate market and the property prices have continued to rise quickly and reached a staggering height. The house, except for its functions as accommodation and shelter, has been valued as investment and speculation tools in China. The emergence of price bubbles will threaten China’s economic and financial stability, and thus the China’s government has begun to adopt a number of measures to try to cool down the overheated real estate market. The policies adopted by China’s government mainly include monetary policies, demand management policies and supply management policies. In the thesis, three variables (i.e., benchmark interest rate, increment of house mortgage loan, and newly started area which represent monetary, demand management and supply management policies respectively) have been used to build a VAR model with the house price index. Then Granger causality test, impulse response functions and variance decompositions methods have been used to verify the relationship between these variables and the house prices, giving the proof of the effectiveness of the policies adopted by the government. Overall, the empirical results suggest that monetary policies prove to have strong effects on the cooling down of house price, but in contrast, supply management policies are ineffective on the decline of house price and demand management policies stay opposite to the purpose of the government. The panic of “chasing the rise of house price” breaks the equilibrium of demand and supply in the market and the speculation and rigid demands dominate the market, which may result in emergence of the price bubbles to some extent. The government may adopt more proactive monetary policies, strengthen the expectation management, increase in quantity the houses supply with a purpose for residential accommodation, and repress the speculation demand in a strict way in order to fulfill the healthy development of China’s real estate markets.