In recent 30 years, countries from the world have attached great attention to the influence on inflation posed by asset price. Real estate market is a very important economic market for any country. Therefore, housing price has become a hot topic for discussion and research in China. Whether housing price will affect a country’s inflation or not and to what extent the effect will be are social focuses. Hence, it is feasible to theoretically apply Tobin’s Q Theory in this paper, combine the real estate market price with the assets replacement and study the inflationary impact posed by the housing price, through the application of the wealth effect theory. By using monthly statistics of China’s real estate market and inflation from the year 2005 to 2014, this paper will conduct a theoretical and empirical research on the influence that housing price has on inflation with the adoption of dynamic analysis methods including Granger Causality Test, impulse response and variance decomposition. Furthermore, this paper is featured with systematic and complete empirical thinking and methodology, comprehensive data selection and distinctive research results associated with the relationship between housing prices and inflations. According to the study result, housing price is the Granger Cause of inflation and will not drive inflation in short time. But as time passes, this effect will be gradually enhanced. This paper suggests that housing price and other price factors should be taken into consideration so as to establish a broad-sense inflation index in China.