Price Discovery Between Chinese House and Land Market Under Different Land Policy

Abstract

For the nation, East and West areas, there was a unidirectional Granger causality running from house price index to land price index before the adoption of new method to sell land right in 2002 However, there was bi-directional Granger causality between land price and house price after 2002. Evidence in these areas supports both of the Neoclassical theory of land rent and the Ricardian rent theory. For the central area, where economics development is slower, there was no Granger causality between land price and house price before using the new land right sale method. However, after the adoption of new method to sell land right, high land price Granger caused high house price, which is consistent with the neoclassical theory of land rent.