China's land price remains stable and consistent in general

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Last updated at: (Beijing Time) Thursday, April 01, 2004

China's land price remains stable and consistent in general

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In 2003, the average land price in municipalities, provincial capitals, cities specifically designated in the state plan and major cities at the Yangtze River Delta and Pearl River Delta were stable but saw a slight rise. This is revealed in the dynamic supervision report on land price in China's major regions and cities issued on March 29 by the Ministry of Land and Resources. The average land price in these cities was slightly higher than that in 2002.

The average land price in the major cities in 2003 was 1,166 yuan per square meter, 92 yuan up over that in 2002. The land prices in metropolitans such as Beijing and Shanghai were apparently higher than other cities. The average land price of the Yangtze River Delta was higher than that in the Pearl River Delta. Of the provincial capitals, municipalities directly under jurisdiction of the central government and cities specifically designated in the state plan, Beijing witnessed the highest land price and Urumqi the lowest. The top ten cities in terms of land price were Beijing, Shanghai, Hangzhou, Nanjing, Chengdu, Tianjin, Guangzhou, Chongqing, Shenzhen and Guiyang.

The report also indicated that the increase of land price used for different purposes varied greatly. The increase of land price in Midwest cities was higher than that in eastern coastal cities. Tianjin, Xining, Yinchuan, Nanchang, Chengdu, Guiyang were cities with big price growth. The growth rate of these cities was 32.93 percent, 20 percent, 17.3 percent, 16.78 percent, 10.96 percent, and 10.54 percent respectively. However, in Fuzhou, Haikou, Shenzhen, Kunming, Taiyuan, Hohhot, Lanzhou, Shijiazhuang, Jinan and Harbin, the average growth of land prices for business purposes remained all below 2 percent.

Tianjin, Guiyang, Nanchang, Chongqing saw great rise in land prices for housing, with the growth rate of 17.48 percent, 16.32 percent, 12.75 percent and 12.45 percent respectively. But the increase rates in Guangzhou, Haikou, Chengdu, Taiyuan, Shijiazhuang, Jinan, and Harbin were lower than 2 percent. To be more specific, the prices in Guangzhou and Chengdu even dropped. Hangzhou was the city that experienced big rise in land price used for industry, with a growth rate of 21 percent. The growth rates in most other cities were below 5 percent. Besides, all cities in exception of Harbin have obtained growth in land prices.

Land price in parallel with development objective

As shown in the dynamic supervision report for the city's land price, the land price in 2003 and its variation in Chinese cities were basically consistent with the overall social and economic development objectives.

First, the rise of land price was lower than the growth of economy. In general, the growth rate of land price in major regions and cities was lower than their GDP growth rate. The difference between the rise of land price and the GDP growth was even bigger in developed cities like Beijing, Shanghai, Guangzhou and Shenzhen. The average growth rate of land price in the Yangtze River Delta was 8.84 percent, whereas its GDP grew at a rate of 11 to 18 percent. But in the Pearl River Delta, the average growth rate of land price was 1.81 percent in 2003, and its GDP grew at 14 to 17 percent.

Secondly, the rise of land price was far behind that of investment in fixed assets. In 2003, the Yangtze River Delta saw investment in fixed assets grew somewhere between 30 to 78 percent. In contrast, the growth rate of land price was 8.84 percent. In the Pearl River Delta, investment in fixed assets grew at a rate of 14 to 40 percent yet the land price rose only at a rate of 1.81 percent. Major cities like Beijing, Guangzhou, Chengdu, Shenzhen, and Shanghai were in similar situation in terms of relation between the growth of land price and that of investment in fixed assets.

The report specially noted that in 2003 the investment in fixed assets underwent rapid growth, but the growth rate of land price went down, a reflection showing that investment had not changed the structure of the land market even though it had some pulling effect to the land price. It is rational to see the increase of land price pegged to the land market mechanism. The stable land price has effectively prevented the foaming in real estate, and therefore stabilized the environment for the development of national economy.

Growth turns out stable this year

The report predicts that the land price in Chinese inland cities will keep on rising in 2004, but in a more smooth way.

As analysis of the report shows, China's macro-economy is optimistic in 2004. China's GDP is predicted to grow at 7 percent and China's urbanization will be sped up with social and economic environment in cities to be further improved. The new investment in real estate and demand for it will rise with the need for land to continue increasing. In the aspect of land supply, control and regulating of land will be intensified and strict restriction will be imposed on transfer from arable land to land for construction; quota for turning arable land into that for construction will be reduced. Such a contradiction between supply and demand will lead to rise of land price. Judging from the supervision on land price between 1999 and 2003, the land markets in major cities were becoming mature gradually. The land price, after continuous increase, has become stable, and taken on characteristics that are consistent with the economic development. All these predict that the land price will not rise too much in 2004, and a relatively stable situation can be maintained instead.

The report indicated that some problems still exist in China's land market and realty market. For instance, they manifest too fast an increase in investment in certain regions, inappropriate structure of land supply, too fast rise of land price and house price, real estate developers hoarding the land and selling to make profits at a right time; low efficiency in land use, and lower land price attributed to excessive development zones and foam in real estate and rise of land price incurred by idle funds in some regions. So in 2004, more efforts are needed to rectify the land market and strengthen the control and regulating of the land for construction. China should lay a tight hold on the land supplied and keep promoting the policy of "market allocates land resources". More efforts should be given to the supervision over the variations in land prices. The land price's function as "barometer" and leverage ought to be fully exerted, so that a stable land price can be ensured and a sustainable and coordinated development of economy be accomplished.

By People's Daily Online

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