International Articles: Effects of Urban Land Supply Policy on Real Estate in China: An Econometric Analysis

Article excerpt

Abstract

Since 2005, the Chinese government has frequently strengthened controls on the real estate market. Land supply policy was included in the system of state macro-control on the real estate market and state economic development. This paper examines the following issues after analyzing the panel data of Yunnan Province and other provinces of China. (1) Does land supply have significant effects on the real estate market after more than ten years of urban land reforms? (2) Which land supply policy affected the real estate market in China? (3) Does it affect the real estate market and macro-economic control of China's existing land supply policy? The main conclusions of the paper are: (1) Land supply policy has a significant impact on the real estate market with the deepening of China's urban land system reform and the development of the land market. (2) China's land supply policy, as a powerful macro-control tool, has an impact on the real estate market under the government's monopoly. (3) The effects of the land tenure and use reform can mainly be seen in the land supply quota and the extent to which the market-driven supply effects the real estate market.

Land supply means the quota of land approved by the municipal government for real estate development and urban construction. China, a socialist country, has a state planned economy. The state owns all urban land and allocates land to each unit for no cost. Urban land, an important factor of production, has been pushed to market since economic system reform in 1979. The State Council of China published the 91st decree, the ''Regulations on Urban Land's Rent,'' based on the land rent policy reforms in Shenzhen and other coastal cities. The government is the only owner of urban land according to the decree. Governments at all levels have monopolies on urban land allocation on behalf of the state.

There are two kinds of land supply. The first, non-market-oriented land allocation, is land allocated for city infrastructures for no cost, such as public utilities, green belts, and so on. The second, market-oriented land allocation, is land allocated for civil utilities based on rent, such as commerce, industrial, housing, etc. However, China's market-oriented land tenure and use reform has not been clear sailing due to historical reasons. It takes some time to transfer from non-market land allocation to market land allocation. The government selected different rent structures for land tenure and use according to the local economy and land availability. This is the land rent policy in China. Yunnan Province did not realize market-oriented land tenure and use until recent years (e.g., the central government required local governments to use more professional ways to launch land to market, such as biddings, auctions, sales, etc.). However, the local government commonly adopted the agreement price on land rent for a specified period due to historic reasons. The professional market-oriented land tenure and use, in the form of biddings, auctions, and sales, has been increasing in recent years under repeated requests from the central government.

China' land supply system has unique features. First, land supply exercises government monopoly, which is similar to Hong Kong in China. It is the first level of the urban land market. The government is the only supplier of land. The second level of urban land market is the real estate trade among land users. A land developer has no right to trade land according to the regulations of China's ''Land Management Code'' and ''Urban Real Estate Management Code.'' Therefore, theoretically, there is no other land supplier except the government. The government can influence and control the real estate market by controlling the quota of land and its price. Second, China's land supply system controls the land supply quota. In addition, it has the power to control land rent. So the definition of 'Land Supply Policy' is the local government changing the quota of land supply and land supply modes to regulate the relationship between real estate suppliers and buyers. …