China’s urban housing price differentiation is increasingly strengthened, while housing prices have generally risen faster. In the rising period of housing prices, the rise in some cities is significantly higher than that in other cities; during the downturn, the decline in these cities is relatively low. How to understand the differentiation in different cities has become an important and urgent task. This paper attempts to provide an explanation based on land supply for the differentiation of urban housing prices in China. The biggest feature of China’s real estate market is that local governments monopolize land supply, which has become the key to understand the housing price rise and differentiation in China. The complete monopoly in the primary land market makes local governments have great power in land supply, who can choose the best land supply strategy under the two endowment conditions of fiscal pressure and growth pressure. Combined with China’s actual situation and existing studies, it can be found that local governments’ land supply strategy is mainly reflected in three aspects: supply quantity, transfer way and distribution. This paper focuses on the land supply strategy of local governments, analyzes the influence of regional endowment on the land supply strategy, and then examines the effect of the land supply strategy on housing price differentiation. The main conclusions of the paper are as follows: First, the fiscal pressure makes the government reduce land supply by more auction and more scattered distribution, while the effect of growth pressure is just the opposite. Second, land strategic supply pushes up housing prices, especially when there is higher proportion of the auction, less land or more scattered distribution. Third, the rising rate of housing prices is heterogeneous in different cities. It depends on cities’ endowment and their choices of the land supply strategy. The policy implication is that the construction of the long-term mechanism of the real estate market should be more from the supply side, which means regulating housing prices through changing land supply. Compared with previous studies, the marginal contributions of the paper mainly lie in three aspects: First, it explains the housing price differentiation in different regions from the perspective of land supply. Second, the paper comprehensively examines the strategic behavior of local government land supply. Third, starting from the two endowments of fiscal pressure and growth pressure of each city, this paper explores the differentiated land supply strategy and housing price trend shown by different regions, which deepens the understanding of the political and economic logic behind China’s real estate market.
Land Strategic Supply and Housing Price Differentiation
Journal of Finance and Economics Vol. 45, Issue 04, pp. 68 - 82 (2019) DOI:10.16538/j.cnki.jfe.2019.04.006
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Cite this article
Liu Cheng, Yang Jidong. Land Strategic Supply and Housing Price Differentiation[J]. Journal of Finance and Economics, 2019, 45(4): 68-82.
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