State Intervention in Land Supply and Its Impact on Real Estate Investment in China: Evidence from Prefecture-Level Cities

Abstract

State intervention in land supply can be a powerful tool in shaping real estate investment. Yet, few studies have examined the effect of central state intervention on land supply at the municipal level and the impact of land supply on real estate investment with respect to different tiers of prefecture-level cities in China. Varying central–local dynamics of land supply in different tiers of cities, and the often taken-for-granted relationship between land supply and real estate investment, warrant further investigation. This study aims to fill these gaps. It is found that the multi-purposed central land policy and the varying land leasing strategies adopted by different tiers of cities contribute to the varying land supply trajectories, calling for more nuanced and better-tailored central land policies that focus on the socioeconomic conditions of cities. The general significant and positive correlation between land supply and real estate investment, revealed by a panel regression analysis incorporating 280 prefecture-level Chinese cities, suggests that land supply control can function as a critical tool in governing real estate investment in China, which also sheds light on the governance and promotion of sustainable real estate markets in other parts of the world. This study also reveals a higher possibility of land speculation in first- and second-tier cities than that of low-tier cities. The nuanced correlations between land supply and real estate investment and the varying land development strategies employed in different tiers of Chinese cities imply that the effectiveness of land supply intervention in shaping healthy real estate investment may depend on local contingencies, calling for meticulous and tailored governance on land supply and real estate investment behaviors.

Analyzing the Land Leasing Behavior of the Government of Beijing, China, via the Multinomial Logit Model

“…In order to improve profits, they hope to push up the prices of commercial and residential land and control the prices of industrial land [25]. State intervention in land leasing is claimed to shape real estate investment; there exists a significant positive relationship between them [26].…”

Heterogeneous Impacts of Policy Sentiment with Different Themes on Real Estate Market: Evidence from China

“…Overall, these studies have proved that these monetary policies have a positive impact on the real estate market [30]. The general significant and positive correlation between land supply and real estate investment, and land supply control can function as a critical tool in governing real estate investment in China [1]. The effect that property taxation has on investment in the real estate market are investigated, and taxation on real estate, possession taxation, transfer taxation, and income taxation has minor importance in terms of influencing investors' choices, even less important in possession taxation [31].…”

“…One of the particularities of the real estate market lies in that it is largely influenced by government policies [1]. The case is especially true in China [2].…”

Two‐stage development, allocation strategies' effect, and industrial land policies' adjustment, China

“…A literature review reveals that scholars' research on industrial land allocation focuses on land finance and land attracting investment behavior (Borras et al., 2019; Huang & Chan, 2018; Wang et al., 2020; Xu, 2019), government intervention and economic growth (Meshkini et al., 2019; Su & Qian, 2020), and land market allocation (Lu et al., 2020; Nakamura, 2019), and academics believe that the transfer of industrial land will increase fiscal revenue. In terms of the effect of industrial land allocation, its impact on employment remains untested empirically.…”