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Blogger: Are land prices really innocent?

By Zheng Fengtian (China Daily)
Updated: 2009-07-01 12:29

Editor's note: Since the 1990s when China started to deregulate its housing sector, the push towards a more privatized real estate market has brought both pros and cons. Recently, a leading Professor from Renmin University, wrote an article on his blog questioning the validity of real estate and land pricing. What follows is a direct translation.

On Wednesday, Lu Xinshe, vice-minister of Land and Resources, released a MLR report on prices of land. The report, based on a survey on 620 real estate projects across the country, claims that, in average, land costs only account for 23.2 percent of the real estate prices, lower than many countries such as the US, the UK, Japan, South Korea and Singapore.

It implies that land prices cannot be blamed for the rocketing costs of housing.

However, if the methods of the survey are looked at closely, we see it did not follow statistical rules and scientific methodology.

Though the Ministry of Land and Resources said it had surveyed 620 projects, for a country as vast as China, they should have polled at least thousands of samples. The methods of sampling are not revealed, too, leading to more doubts on whether it could reflect the whole picture of China's real estate market.

Another flaw in the method of conducting the survey was that the ministry sent out forms to local authorities and real estate developers to fill in information about land prices.

To offer a trustworthy report on the land and housing prices, the best way is to commission an independent non-governmental agency or agencies to conduct the survey. Since independent agencies are not stakeholders in the real estate market, their surveys should be relatively authentic and reliable.

A non-governmental organization released a similar report on land and housing prices in March.

The All-China Federation of Industry and Commerce released its survey results, which showed land prices accounted for 58.2 percent of the housing costs.

Judging from common sense and experience, the figure seemed closer to reality.

The survey should also consider the regional imbalance of housing prices. In many metropolises, such as Beijing, Shanghai, Guangzhou, Shenzhen and Hangzhou, housing prices have become unaffordable for families with low and medium incomes. Separate figures for these cities should be recorded and made public.

Zheng Fengtian, a professor at the Renmin University

http://blog.163.com/zft2000/blog/static/105336823200952473236441/