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Regional Competition, Land Supply Structure and Urban Housing Price in China

【Authors】
PI Yabin, LI Chao
【WorkUnit】
PI Yabin (Jinan University, 510632)LI Chao (National Academy of Economic Strategy, CASS, 100028)
【Abstract】

This paper analyzes the construction land supply strategy of local governments in the context of regional competition and its impact on housing prices. On the basis of summarizing the characteristics of China's construction land supply laws and regulations, this paper establishes a two-city model including housing land demand and production land demand, discusses the motivation and economic consequences of the local governments' intervention in the land supply structure, and then tests the theoretical hypothesis proposed based on the urban panel data from 2006 to 2015. The model analysis shows that local governments have incentives to attract investment by reducing the proportion of residential land and increasing that of industrial land, when the total amount of construction land is limited. Compared with the market competition mode, the industrial land price will be higher, while residential land price will be obviously lower if local governments control the land supply structure. Economic development and population inflow drive up housing demand, while the residential land supply is declining, pushing up the housing price from both supply and demand ends. In addition, local governments' intervention in the land supply structure will further affect the land supply strategy in neighboring areas. This paper has reference value for accelerating reform of the long-term mechanism for real estate market and solving the problem of high housing price from the supply side.

 

JEL:H77, R13, R52

【KeyWords】
Regional Competition, Land Finance, Land Supply Structure, Housing Price