Local Government Land Transfer Income, The Analysis Of The Relationship Between Fiscal Spending And Real Estate Prices

In the past 30 years, China has carried out the housing reformation. In the meanwhile, the real estate industry has got a stage of vigorous development. At the same time, accompanied by booming real estate market supply and demand situation is the rapid rise in property prices. In the past decade, the average national housing price has increased 128%. Property prices is affecting not only ordinary people's live and work, but also the country's macroeconomic trends closely. The macro-control is necessary to stabilize the excessive growth of house prices. However, which are affecting housing prices continued to rise? What is the role that local government has played during the housing prices is becoming higher? Which kind of policy should government take to control the real estate industry? In my article, I attempts to analyze all above questions in detail.This article uses the improved Tiebout model theory as a foundation, analyzing the impact of local fiscal expenditure and the land transfer revenue. How do they influence the quality and the cost of public goods which enjoyed by the residents. Based on the panel data of 30 provinces from 1999 to 2007, I will build models and make the relevant cointegration test and do Granger causality test. Then, I would like to explain the relevance of local government's expenditure, land transfering income and property prices.From the empirical results show, we could know that both local public spending and the land transfer revenue have positive correlation with local real estate prices. In addition, the local government land transfer revenue have a different effect for the housing price among different regions. Specifically, the most obvious area is eastern. In view of this result, I have two policy recommendations. First of all, the local governments should regulate their behavior of land transferring, or create the land fund to change the local governments' short-sighted behavior. Secondly, the existing property tax system should be improved. It should maintain the real estate tax. This policy will not only fight against real estate speculators, but also increase the financial sources of local government.