Dynamic effects and spatial heterogeneity of land supply on housing price: evidence from Nanchang, China

• DOI: https://doi.org/10.1108/IJHMA-02-2021-0022
• Published date: 06 August 2021
• Date: 06 August 2021
• Pages: 875-894
• Subject Matter: Property management & built environment,Real estate & property,Housing markets
• Author: Zhijiang Wu,Yongxiang Wang,Wei Liu

Dynamic ef‌fects and spatial

heterogeneity of land supply on

housing price: evidence from

Nanchang, China

Zhijiang Wu

School of Economics and Management, Tongji University, Shanghai, China, and

Yongxiang Wang and Wei Liu

School of Civil Engineering and Architecture, East China Jiaotong University,

Nanchang, China

Abstract

Purpose –Economic fundamentalsare recognized as determining factors for housing on the city level, but

the relationshipbetween housing price and land supply has been disputed.This study aims to examine what

kind of impact housing prices haveon land supply and whether there is heterogeneity in different regional

spaces.

Design/methodology/approach –This study collects the relevant data of land supply and

housing prices in Nanchang from 2010 to 2018, constructs a vector autoregression (VAR) model,

including one external factor and four internal factors of land supply to explore the dynamic effects

and spatial heterogeneity of land supply on housing prices through regression analysis. Also, the

authors use the geographic detector to analyze the spatial heterogeneity of housing prices in

Nanchang.

Findings –This study found that the interaction between land supply and housing price is extremely

complex because of the signif‌icant differences in the study area; the variables of land supply have both

positive and negative effects on housing price, and the actual effect varies with the region; and

residential land and GDP are the two major factors leading to the spatial heterogeneity in housing

price.

Research limitations/implications –The dynamic effectsof land supply on housing price are mainly

ref‌lected in the center and edge of the city, the new development area, and the old town, which is consistent

with the spatialpattern of the double core, three circles and f‌ive groups in Nanchang.

Originality/value –This is a novel work to analyze the dynamic effects of land supply on house

prices, instead of a single amount of land supply or land prices. Furthermore, the authors also explore

the spatial heterogeneity according to the regional characteristics, which is conducive to targeted

policymaking.

Keywords Housing, Real estate, Asia, Housing markets, Housing prices, Housing market analysis,

Dynamic effects, Land supply, Spatial heterogenity

Paper type Research paper

Declaration of Competing Interest: The authors of the paper certify that they have no conf‌licts of

interest of any kind.

Data Availability Statement: Some or all data, models or codes that support the f‌indings of this

study are available from the corresponding author upon reasonable request.

The research described in the paper is funded by the Social Science Foundation of Jiangxi Province

(Grant No: 20GL20). We also appreciate the detailed suggestions and comments from the editor and

the anonymous reviewers.

Dynamic

ef‌fects and

spatial

heterogeneity

875

Received20 February 2021

Revised21 June 2021

Accepted23 June 2021

InternationalJournal of Housing

Marketsand Analysis

Vol.15 No. 4, 2022

pp. 875-894

© Emerald Publishing Limited

1753-8270

DOI 10.1108/IJHMA-02-2021-0022

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1753-8270.htm

1. Introduction

Housing is the largest f‌ixed asset of most households, and its price has a crucial impacton

both the users who want to buy a house and the owners(Mills et al., 2017). For home buyers,

they are very worried that they are hard to raise enough money to pay the down payment

because of rising house prices (Oikarinen, 2009).In contrast, homeowners are eager to keep

rising house prices to make their f‌ixed assets appreciate and gain more wealth. Moreover,

the psychological differences among different stakeholders show that house prices have a

signif‌icant impact on the real estate transaction mechanism. According to the survey

conducted by Wang et al. (2020), the average houseprice in China has increased 10 times in

the past 20years, while that in Beijing, Shanghai, and other megacitieshas increased nearly

20 times, with an averageannual growth rate of nearly 10%. In the open market,as a kind of

circulation, the price rise of housing deviates from the relationship between market supply

and demand. In recent years, although the government has taken strong and effective

measures to control house prices,the rise of housing prices is still an irreversible trend, and

the hidden factors are complex (Du and Peiser, 2014;Yuan et al.,2018). Furthermore, land

supply plays an importantrole in the f‌luctuation of house prices (Li et al., 2016).

Nanchang is a city with rapid economic development, which economy and per capita income

are close to the level of medium-sized cities in China. Although the total economic scale is

medium, the housing price to income ratio is at the forefront of the same cities (such as the

average house price to income ratio reach 13.64in 2019). It shows that the average income level

is low but the housing price is relatively high, with low price bubbles. In the past 10 years, the

population of Nanchang has increased by about 600,000, which is also behind the same cities,

and the average annual land supply is also behind other cities. Therefore, it ref‌lects that land

supply is still the direct correlation factor of high housing prices in Nanchang, while the

population factor is less important than other cities. In addition, the revenue from land transfer

accounts for a large proportion of the f‌iscal revenue, which shows that the Nanchang municipal

government wants to adopt a more relaxed land control policy, but has to implement the central

government’s tightening control policy (Xie et al.,2020). Under the combined effect of this

complex policy, land supply is also dynamic and ultimately affects housing prices.

Before clarifying the inf‌luence mechanism of land supply on house prices, we need to

analyze the multidimensional differences of land supply. Land resources are limited;

especially in the process of urbanexpansion, a large number of agricultural land needs to be

developed. The government monopolized the supply of land and tried to limit the scale of

land to the real estate marketthrough macro-control (Oikarinen, 2013;Wang etal., 2017). To

maximize prof‌its, however, developershoard a lot of land, which makes the land always in

short supply (Ye and Wu, 2016). On the other hand, the continuousrise of housing prices has

also stimulated more hot money to invest in the real estate market, and developers are also

trying to buy land, further aggravating the shortage of land supply (Coskun et al.,2017;

Long et al., 2012;Yap and Ng, 2018). Through a large number of studies,scholars who pay

attention to market economics f‌ind that land supply is always the most important factor

affecting housing prices, and the change of land supply is bound to lead to f‌luctuations in

house prices (Vogiazas and Alexiou, 2017;Wanget al.,2018).Furthermore, the quantity and

type of land supply will affect the land price, and the land price will also have a negative

effect. In this regard, housing prices will be affected under the complex land exchange

mechanism. The detailedinteraction mechanism will be discussed in Section 3.

The impact of land supply on house price has been widely concerned by scholars, and

research focuses on the relationship between land price and house price, and the lag of the

effect (Han and Lu, 2016;Long et al.,2012;Mills et al., 2017;Oikarinen, 2013;Prishchepov

et al.,2013;Wang et al., 2018). Previous studies discussed the relationship between land

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