Land finance, infrastructure investment and housing prices in China

Abstract

Housing prices in China have experienced rapid growth in recent decades, and land finance has long been discussed as an important factor in this growth. In this paper, we explore the interactions among housing prices, land transfer revenue and infrastructure investment from the perspective of government revenue and expenditure. Based on the panel data of 35 large and medium-sized cities in China from 2000 to 2017, the empirical results show that land transfer revenue, infrastructure investment and housing prices are causally related and result in positive feedback. The grouped regression results show that infrastructure investment has greater impacts on housing prices in eastern region cities than in the other cities. In contrast, in the central and western regions, land sales revenue has a greater impact on housing prices, indicating that cities in less-developed areas are more dependent on land finance than are those in more developed regions. Finally, we use the vector error correction model (VECM) to add control variables for robustness testing. The results show that land transfer income and infrastructure investment have a positive impact on housing prices. Our results provide some references for the stable development of housing markets in China.

Drinking Poison to Quench Thirst: Local Government Land Financial Dependence and Urban Innovation Quality

“…Typically, local governments adopt the strategy of granting industrial land at low prices and commercial land at high prices. Specifically, local governments offer industrial land at low prices to attract commercial investment and offer commercial land at high prices to compensate for the loss of fiscal revenues caused by industrial land concessions, which is far below the cost of compensation for agricultural land, and they also invest more of the proceeds from land concessions in productive expenditures, such as infrastructure [37]. Although this strategy has contributed to the rapid economic development of cities, it has also had many adverse effects on UIQ.…”

The Impact of Recognized Features of Uncomfortable Houses on Auction Prices: A Chinese Cultural Perspective

“…Prior studies have consistently demonstrated the significant influence of Feng-shui features on housing prices. Chen (2005), for instance, investigated land consolidation in Taichung and found that road-facing land experienced a depreciation effect. Conducting a regression analysis exclusively on residential areas, Chen (2005) observed that facing-road-clash had an even more pronounced impact on the discount rate of residential land.…”

“…Chen (2005), for instance, investigated land consolidation in Taichung and found that road-facing land experienced a depreciation effect. Conducting a regression analysis exclusively on residential areas, Chen (2005) observed that facing-road-clash had an even more pronounced impact on the discount rate of residential land. On average, land with road-facing attributes exhibited a discount rate of 10%, while residential land with signs of facing-road-clash had an average discount rate of 14%.…”

“…For instance, C.-C. Lin and Huang (2014) found a roughly 10% price decrease due to negative Feng-shui features. Chen (2005) reported a regression model showing road-facing properties experiencing an average price decrease of 1.61 to 1.63 million TWD. C.-M. Lin (2007) identified specific concerns when buying houses near T-junctions, temples, scissors intersections, house corners, anti-bows, dead-end alleys, electricity facilities, and overpasses.…”