Empirical Research On The Relationship Between Land Finance And Real Estate Price

Since the reform of the housing system in 1998, China’s real estate market has entered a stage of prosperity and development. The rapid development of the real estate has made important contributions to the sustained economic growth and the acceleration of the process of urbanization. At the same time, the prosperity of the real estate is always accompanied by the rising housing prices. The "house" problem related to Chinese happiness and social harmony and stability has gradually become the focus of social concern. This paper attempts to explore the factors that affect housing prices from the system perspective. According to public economics point of view, the local government is to pursue the maximization of its own interests as the "economic man".It seeks to maximize local revenue in order to achieve the goal of economic growth in the region. Because of this, the local government has embarked on the road of "land management" under the promotion of the tax-sharing fiscal system, the present land system and the promotion evaluation system of local officials. The local government has reason to take measures to maintain and even promote the increase of housing prices.Based on the above analysis, this paper makes an empirical research on the relationship between land finance and housing prices by use of panel data of 71 cities from 2005 to 2013 in China. Because China is a country with a vast territory, resource endowment, the level of economic development, financial revenue and expenditure and consumption habits of the residents are differential in different regions. This leads to the result that whether the degree of prosperity and development of real estate market, or the local government financial dependence on the land, are likely to have regional differences. Therefore, this paper makes an empirical research from national level and regional level including static model and dynamic model in order to achieve a comprehensive conclusion. Based on the empirical research findings, this paper makes two conclusions. Firstly, according to the empirical research of national level, no matter static model or dynamic model, conclusions indicate that land finance have a positive impact on housing prices, and in the model of land finance, the higher the degree of the local government rely on it and the larger scale of land finance, the higher housing prices. Secondly, according to the empirical research of regional level, conclusions indicate that the degree of the influence of land finance on housing prices relates to the level of the prosperity of the economy and the level of the development of the real estate market and land market in different regions. Specifically, compared eastern areas as developed regions with central and western areas as underdeveloped regions, land finance has more influence on housing prices.