LEI Genqiang, QIAN Rifan:An Analysis of the Impact of Land Finance on Real Estate Development Investment and Commercial Housing Prices——Empirical Evidence From China's Prefecture Level Panel Data

Abstract  As China's real estate industry continues to overheat and housing prices continue to rise in recent years, both the public opinions and scholars in China tend to believe that land finance is the leading factor of the above problems, and that to change the existing land finance system is the premise of China's housing price regulations. In this paper, we first measure local dependence upon land-transferring fees, then we build a dynamic panel data model of prefecture-level city, and study the impact of land finance on relative scale of real estate development investment and commercial housing prices respectively by applying generalized method of moments. The results show that, local dependence upon land-transferring fees has a significant positive impact on real estate development investment; however, it does not affect housing prices significantly. The main factors that influence housing prices come from adaptive expectations and social economic fundamentals. Thus, we point out that to ensure housing price stability, government should keep the policies relatively stable and balance both supply and demand of real estate market. In order to control the overheated real estate industry, we should reduce local governments' financial dependence on land by improving the local tax system and by applying some other approaches. Meanwhile, China's government should handle the benefit redistribution problem when housing prices are rising.

Key words： Land Finance    Real Estate Development Investment    Housing Price    Dynamic Panel Data Model

  Source: Finance & Trade Economics , No.10, 2014