The Effect Of Land Price Signal On Housing Price

In these years, land price and housing price are keeping increasing, which has become a serious problem related with people's livelihood and crucial state Macro-control issue. The relationship between land price and housing price has brought a lot of hot debate. There is one view that the rise of land price increases housing cost, leading to high housing price. While, another one argues that the proportion of land price to housing price is limited so land price is not the main reason of high housing price. The broad disputes draw abundant academic research and a lot of empirical studies have been done on this topic. There are three main viewpoints: derived demand view, cost drive view and interaction view. Most of these researches are based on Urban Economics, Neoclassical Economics and Spatial Economics; focus on the relationship of land price and housing price in the long-run equilibrium level. However, in the real world, real estate market is not always in equilibrium. Housing price may be shocked by land remising event if land price is relative high or low. Around the land remising event, housing price moves a lot without the changing of economic fundamentals. According to price discovery theory, which is based on Behavior Economics and Information Economics, besides the economic fundamentals, housing price movement is also caused by non-economic factors such as price signals in land market. Relative high or low land price is considered as containing new information, which may transmit to residential market and cause housing price move.This paper, based on the price discovery theory, studies the unidirectional action of price signal of land remising on housing price. Using micro data of Hangzhou, it empirically testes the effects of land price signals on housing price on the city level, district level and project level from chapter four to chapter seven. In chapter four, with 199 transactional data of residential land in Hangzhou from January 2006 to December 2010 and time series data of housing price of new construction in Hangzhou city in that period, this paper constructs a ARMA model and tests the effects of land price signals on housing price of the city level. In chapter five, this paper narrows the target to district level, uses 177transactional data of residential land in Hangzhou from January 2006 to March 2010 and price data of new residential construction in the 7 districts of Hangzhou in this period to test the effects of land price signals on regional housing price with event study for reference. Besides, signal effect asymmetry and the moderator effect of market situation are included in the model and tested. In chapter six, this paper deepens the research and narrows the target to projects around the remising land, with 177transactional data of residential land in Hangzhou from January 2006 to March 2010 and sales data of 251 new residential projects, tests the effect of price signal of land remising on projects within 1km, 1km-2km and 2km-3km from remising land respectively and implies the diffusion effect of price signal of land remising in space. In chapter seven, with 177transactional data of residential land in Hangzhou from January 2006 to March 2010 and sales data of 251 new residential projects, based on hedonic model, this paper constructs a model explaining the effect of houses characteristics and other factors on housing price fluctuation, analyzes the project differentiation about effect of price signal of land remising on housing price. From systemic theory and empirical analysis, several conclusions are got.First, price signal in the land market produces the fluctuation of housing price. Land market and real estate market are closely related. The land is the raw material of real estate and the land price plays a big role in the residential cost. Land price shows the expectation of real estate developer to real estate market in the future; either lower price or higher price is thought of containing new information. Once this signal is delivered to real estate market, the expectation and decision of house buyers is influenced with the result of fluctuation of house price.Second, according to the effect scope, price signal of land remising only influences the housing price in the area of remising land greatly. However, it doesn't have the significant effect on the housing price of the whole city. The effect of price signal of land remising is regional with the strong regionalism of land and real estate. After the land is remised, the price signal of land remising has the significant effect on this area. However, with the limitation of effect scope of price signal, it doesn't have the significant effect to the whole city.Third, the effect of price signal of land remising on housing price is asymmetric. The effect of negative price signal on housing price is more significant than that of positive price signal. When the market situation is stable, lower price of land remising delivers the negative signal, leading to the decrease of housing price. However, higher price of land remising is probably thought that real estate developers suffer winner curse or increase price on the purpose, so the positive signal doesn't have the significant effect to housing price.Fourth, in good market situation, positive price signal of land remising contributes to the housing price significantly. In the good market situation with the continuous increase of housing price, market participants are more like to expect the increase of housing price. At the same time, the positive signal in the land market proves the public's expectation that housing price will continue to increase, strengthens their faith and influences their consume decision, which leads to the increase of housing price.Fifth, price signal continually diffuses outwards with the time with remising land at the center. The price signal diffuses to the project which is lkm far away from remising land in that month. One month later, the price signal of land remising diffuses outwards to the project which is lkm-2km far away from that land. Two months later, the price signal of land remising expands outwards to the project which is 2km-3km far away from that land.Sixth, under the influence of negative price signal of land remising, the price of high quality house decreases smaller than the price of normal quality house does. The negative price signal of land remising produces the decrease of housing price, but housing prices with different characters decrease different. Compared to normal quality house, the high quality house with decoration and high greening rate suffer the negative signal price of land remising less, so the price decreases smaller. Compared with existing researches, the innovations and academic value of this paper is presented on the bellowing parts:First, this paper discovers the effect of price signal of land remising on housing price under the background of China mainland. The prior land price and housing price researches which are based on the market equilibrium theory cannot explain the effect of land remising events on housing price. The city level data covers the characteristics of project so those researches cannot explain project differentiation about effect of land price on housing price. Based on the view of price discovery theory, with the data of city level, district level and project level, this paper empirically studies the effect of price signal of land remising on housing price under the background of China mainland and richens the existing relevant researches.Second, this paper testes the moderator effect of market situation between price signal of land remising and housing price in real estate market. The risk-avoiding attitude of investors make the reaction to negative signal is bigger than reaction to positive signal in good market situation in price discovery theory. The paper tested the moderator effect of market situation between price signal of land remising and housing price in real estate market and got the different conclusion that there is positive moderator effect of market situation between positive signal and housing price. In good market situation, positive price signal of land remising contributes the increase of housing price. It is mainly because that the dependence of governments in China mainland on real estate market makes the market participants with the abundant market information and low risk-avoiding. They tend to receive the signal which is accord with expectation of housing price increasing, so the good market situation and positive price signal of land remising motivate the housing price increase together.Third, this paper discloses the diffusion effect of price signal of land remising in the space scope. Many researches did regional researches about the land and real estate; however, they focus on the topics about space distribution characteristics of land price and housing price while pay less attention of space diffusion effect of price signal of land remising. The paper studies this topic and finds that price signal of land remising centers at remising land, diffuses outwards continually with time.Fourth, this paper demonstrates the project differentiation of housing price fluctuation brought by price signal of land remising and its influence factors. In the housing price relevant researches, many researchers demonstrated the effect of housing characteristics on housing price with hedonic model. Based on hedonic model, this paper builds the effect model of the housing characteristics and other factors on housing price fluctuation, analyzes the effect of housing characteristics on housing price fluctuation, and discovers that under the effect of negative price signal of land remising, price of high quality project decreases smaller than price of normal quality project does.With the limitation of time, energy, research condition and so on, there are some shortages bellowing in this research: First, this paper just chose the data from January, 2006 to December 2010 in Hangzhou, the sample data is not sufficient. Second, this research is based on Hangzhou, we still need to analyze whether it is suitable for other cities. Third, it is not accurate enough of using mean value of unit as the variable of housing price. Fourth, this paper does not control the impact of big political events to housing price successfully. In the future, we can continue the research in these parts: first, study the effect of housing price fluctuation on land remising price and build the model of mutual influence between land remising price and housing price. Second, study the expectation and decision making of consumers and real estate developers under and price signal of land remising, disclose the effect function and path of price signal of land remising on housing price. Third, test and measure the impact of macro-economic control on real estate market accurately.