A Study on the Relationship Between Housing Pricing and Land Pricing:Basic Model and Evidence from China

This paper examines the impacts of the site-scale of real estate developers,vacant land ratio and Floor Area Rate on housing pricing,land pricing and the relationship between them.It analyzes two cases of Cournot Competition and regulation respectively by developing a linear city model for housing market and land market The fundamental conclusions are as follows;(i)the housing price is the decreasing function of Floor Area Rate;(ii)housing price and land price are the increasing function of vacant land ratio;(iii)housing price is the increasing function of the site-scale of real estate developers;(iv)housing price and land price under regulations are higher than those without regulations;(v)the correlation between housing price and land price is negative when there exists excessive supply of land;(vi)the correlation between housing price and land price is positive when there exists scarce supply of land;(vii)Granger causality test of the housing price and land price demonstrates that,when there exists scarce supply of land,housing price interacts with the land price in the short run,and land price is the Granger cause of the housing price in the long run.In order to curb the rigid housing price,the following policies are required.Firstly,the government should increase the supply of land including moderating the proper Floor Area Ratio and control housing price and land price in- crease drastically in the short run.Secondly,the government should prevent t land price from increasing sharply in the long run.