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Supply and demand, not land value decides housing prices
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14:48, July 27, 2009

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The relationship between supply and demand is the deciding factor for land value, while developers' expectations about future housing prices directly influence land demand, according to a special investigation by the Ministry of Land and Resources (MLR).

The MLR's investigation into land values for real estate projects shows that since 2006, the average proportion of land value in housing price for commercial real estate projects with land usage rights was 23.2 percent.

Among the survey's 620 cases, the lowest proportion of land value stood at 5.3 percent and the highest was 58.6 percent. In most cases the value was 15 to 30 percent of the housing price. The overall average for land value stood at 23.2 percent of the housing price, while the proportion for about 78 percent of the cases stayed below 30 percent.

In terms of the territorial location of these cases, the average proportion of land value for the 316 cases in eastern China stood at 27 percent, the 158 cases in central China stood at 21 percent and the 146 cases in the western region stood at 18 percent.

Skyrocketing land prices in some cities are due to multiple factors including: land location, capital inflow from other industries, enterprises going public and handling of capital. In particular, the rule of "the better the location, the better the sale" has led to fierce competition among developers.

By People's Daily Online


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