Land Price Index Research Articles

A Study on the Method for the Classification of Homogeneous Land Price Areas*

The Official Announcement System of Land Price involves the announcement of the Reference Prices of 500,000 standard lots among a total of 32 million lots across the nation, followed by the assessment of the land prices of individual lots based on the Reference Prices of standard lots and the land price index table. Although it has been twenty five years since the introduction of the system, several problems still remain regarding the unequal distribution of standard lots, the imbalance between Announced Reference Prices and assessed individual lot prices and among assessed individual lot prices. Dividing lands into homogeneous land price areas (HLPAs) has previously been proposed; however, implementation of the method was difficult due to the difficulty in determining the proper spatial boundaries of the homogeneous price area. This study aims to propose a method for and examine the validity and effectiveness of utilizing computers to classify HLPAs, categorizing into the same group lands of the same usage and the same land-use zone within the same administrative area, regardless of the spatial proximity of lands. The result shows that it is possible to classify HLPAs in a prompt and consistent manner, and to sub-classify the price layers according to the regional land price distribution, fitting the characteristics of each region. This study demonstrates that the proposed method can enhance efficiency in allocating and distributing standard lots, while restoring the balance between the standard lot price and assessed individual lot prices, and among assessed individual lot prices. It also shows that the systematic utilization of market prices allows assessed land prices to be closer to the market price.

공시지가의 균형성 제고를 위한 유사가격권 구분방법의 실증 분석 연구

The Public Notification System of Land Price involves announcement of the Reference Land Price of 500,000 standard lots among a total of 32 million, followed by assessment of the land price of individual lots based on Reference Prices of standard lot and the Land Price Index Table. Although it has been twenty five years since the introduction of the system, several problems still remain regarding unequal distribution of standard lots, imbalance between Notified Reference Land Prices and individual lot prices, and among individual lot prices. Dividing lands into homogeneous price areas has previously been proposed; however, implementation of the method was made difficult due to the difficulty in determining the proper spatial boundaries of the homogeneous price area. This study aims to propose methods and verify the validity and effectiveness of utilizing computers to classify the homogeneous price, categorizing lands into groups of land located in the same administrative area, with the same usage in the same zone, regardless of the spatial proximity of the land. The result shows that it is possible to classify the Homogeneous Land Price Area in a quick, consistent manner, and to sub-classify the price layers according to the regional land price distribution, fitting the characteristics of each region. This study demonstrates that the proposed method can enhance efficiency in allocating and distributing standard lots, while restoring the imbalance between prices of standard and individual lots, and those among individual lots. It also shows that systematic utilization of real transaction prices allows assessed land price to be closer to the market price.

A GIS-Based Web Approach for Serving Land Price Information

Participants in the land market are usually hampered to browse and analyze the land price information due to the lack of information sources and available analysis tools. A service-oriented GIS-based web system was developed to provide a practical solution, its essential data sources contain basic geographic elements and benchmark land price (BLP)-related information. Core models for land price analysis were implemented, including land price index, spatial distribution, and parcel appraisal. The system was developed based on a four-level Browse Server (B/S) architecture using GIS and web service technologies, which enables the publishing, browsing, and analysis of the land price information via the Internet. With effective functionalities, the system has been employed in a project for updating BLP in a case study city located in China. The main advantage of the GIS-based web approach lies in its integration of spatial-temporal analysis models and web GIS technology, which allows more investors and administrators with limited domain knowledge to obtain further understanding on the change pattern and spatial distribution of land price by an online means. The experience in the case study city demonstrates that the approach has strong practicality for land price information services.

Understanding the short- and long-run relationship between vacant allotment and established house prices

Purpose– The purpose of this paper is to address a key issue fundamental to the operation of land and housing markets, that is, the relationship between land and house prices. The study identifies possible causation between established house and vacant allotment prices using the metropolitan area of Adelaide, Australia as a case study.Design/methodology/approach– A key outcome of the study is the construction of a Site Adjusted Land Price Index against which a Quality Adjusted House Price Index is compared.Findings– The results show that there is a lagged effect of land prices on house prices and that this is significant at an interval of eight lag periods. The results also imply that the lead lag relationship between established house and vacant allotment prices is not unidirectional. This suggests that, while a change in house prices leads to a change in land prices in the short-run, the long-run position is for increasing land prices to lead to a delayed increase in house prices.Research limitations/implications– Rising house prices do not simply and solely reflect a shortage of land. There are suggested effects both immediate from house to land and delayed from land to house, particularly in a rising market.Originality/value– The lead lag relationships of both indexes are tested using Granger causality estimates to assess whether theoretical Ricardian concepts still hold in a modern urban land market.

A Consistent Estimate of Land Price, Structure Price, and Depreciation Factor

The price of a single-family house can be viewed as the bundle of the land price, and the replacement/construction cost of the structure, adjusted for depreciation. Given the difficulty in obtaining accurate estimates of each of the elements, previous researches estimate land price as the residual via subtracting the external construction cost and depreciation factor from home price. In this paper, we provide a coherent framework, in which land price index, construction cost index, and depreciation factors can be estimated from home price data, without relying on exogenous assumptions on construction cost or depreciation factors. We demonstrate our methodology by using AHS microdata to estimate land price, structure price, and depreciation indices simultaneously in six large metropolitan areas. The empirical results are consistent with previous research papers. To our knowledge, our method is the first to combine repeat sales approach and hedonic approach, and estimate all three indices simultaneously in an internal consistent fashion. This method can be utilized to provide historical estimates of residential land prices, and serve as the basis for land price forecasts.

Testing for Bubbles in Housing Markets: New Results Using a New Method

In the context of financial crises influenced by the development and burst of housing price bubbles, the detection of exuberant behaviors in the financial market and the implementation of early warning diagnosis tests are of vital importance. This paper applies the new method developed by Phillips et al (2012) for detecting bubbles in the Colombian residential property market. The empirical results suggest that currently the country could be experiencing a price bubble, when the CPI and the housing rent index are used as deflators. We do not check the robustness of these results to alternative deflators, such as a household income index and a land price index, due to the lack of monthly data on these indicators.

Evaluating conditions in major Chinese housing markets

High and rising prices in Chinese housing markets have attracted global attention. Price-to-rent ratios in Beijing and seven other large markets across the country have increased by 30% to 70% since the beginning of 2007. Current price-to-rent ratios imply very low user costs of no more than 2%–3% of house value. Very high expected capital gains appear necessary to justify such low user costs of owning. Our calculations suggest that even modest declines in expected appreciation would lead to large price declines of over 40% in markets such as Beijing, absent offsetting rent increases or other countervailing factors. Price-to-income ratios also are at their highest levels ever in Beijing and select other markets, but urban income growth has outpaced price appreciation in major markets off the coast. Much of the increase in prices is occurring in land values. Using data from the local land auction market in Beijing, we are able to produce a constant quality land price index for that city. Real, constant quality land values have increased by nearly 800% since the first quarter of 2003, with half that rise occurring over the past two years. State-owned enterprises controlled by the central government have played an important role in this increase, as our analysis shows they paid 27% more than other bidders for an otherwise equivalent land parcel.

National Transaction-based Land Price Indices

Using data on a large sample of land transactions, this paper develops quarterly national land price indices for residential, commercial, and industrial land use categories over the 20 years period from 1991 to 2009. We find significant differences in variability across land uses, with residential exhibiting the most volatility. Our particular interest in this paper is to compare intertemporal land prices with other prominant real estate indices. In all cases, the transaction-based land price indices leads the other indices.

Spatial Analysis of the Urban-to-Rural Migration Determinants in the Viennese Metropolitan Area. A Transition from Suburbia to Postsuburbia?

Currently urban spatial structures are affected by pervasive developments, which provoke a diversity and reorganization of population. This article examines the driving forces that cause urban-to-rural migration of population in the Austrian metropolitan area of Vienna using exploratory spatial analysis methods over the time period from 2001 to 2006. To model the qualitative changes between sub- and postsuburban processes, fuzzy sets are applied as variables. Because of significant concentration of high urban-to-rural migration along the main transportation corridors, a geographically weighted regression approach is used to determine whether suburban or postsuburban determinants are essential to predict urban-to-rural migration. The results show that the spatial variation of urban-to-rural migration can be statistically best modeled by using the two covariates “good accessibility to the core city by motorized individual transport” and a “high land price index”. The article argues that this represents the prominence of classical hard location factors, which are interpreted as typical suburban. Accordingly, the metropolitan area is—concerning urban-to-rural migration—still under the influence of suburban processes.

The influence of land price indices on urban planning in Beijing, China

The influence of land price indices on urban planning in Beijing, China

South Carolina’s Colonial Land Market

This study analyzes noncredit, rural property transfers from colonial South Carolina. These records are used to measure the frequency, annual timing, geographic spread, and turnover rate of land sales. These data also are used to derive a hedonic land-price index. We argue that these estimates reflect variations in the local expectations of future economic growth and conclude that the rapid increase in land prices reflected the fact that the Low country economy was indeed fueled by plantation agriculture.

Empirical testing of real option pricing models using Land Price Index in Japan

The purpose of this research is to examine the way uncertainty plays a role in built land prices. This paper provides basic real option pricing models of land prices on the demand side in central Tokyo. The model in this research analyzes micro land prices covering individual lot data provided by the Land Price Index. Since land prices are determined by both macro economic environment and micro lot‐specific attributes, this paper utilizes both time‐series economic data and cross‐sectional lot‐specific data. The model incorporates both time‐series (macro) and cross‐sectional (micro) data including uncertainty terms. In addition to the total uncertainty in asset prices over years, this research also gives some ideas of cross‐sectional uncertainty in land price variations by utilizing cross‐sectional amenity variables. These cross‐sectional and time‐series variables including the two uncertainty variables are arithmetically combined and the OLS method is conducted. The data set consists of 4,368 land price data from 1985 through 2000. The results from the option‐based models favor the application of the real option theory in land prices. The total uncertainty with respect to built asset return has a substantial effect on increasing land prices, which implies that an increase in uncertainty leads to an increase in land prices.

Bank lending behaviour under a liquidity constraint

In this paper, we propose a new model of bank lending behaviour, in which there are three possible regimes under asymmetric information. We have found empirical evidence for the existence of the third regime, in which banks lend under their liquidity constraint. In this regime, both the land price index and bank capital have large and positive effects on bank loans. On the other hand, the call rate and economic activity (real GDP) have negative effects. Moreover, we have a new understanding of how financial liberalization and the regulation of bank capital also affect bank lending behaviour.

Market Potential for U.S. Small Farmers in 2000

The U.S. small farms faced unprecedented financial stress since the Great Depression of 1930's. These economic difficulties are caused by stagnation of foreign markets for farm products, depressed agricultural price, technological changes, and shaken credit markets. This paper examined the extent of the number of farm exits, the reasons for the exodus, and market share of small farms, as these are all vital national issues for our time. Multivariate regression model was used to predict the number of farm exits. Land value, farm export, unemployment rate, price indices and time variable were used to explain the number of farm exits. The projection indicates that the number of farm exits will continue in the future, but the net annual farm exit will gradually decline. Accordingly, the market share of small farms will diminish significantly. National policies for small farms embrace two policies, promoting farm diversification as well as to wait for its own disappearance.

A Melbourne Land Price Index: Problems of Measurement

Land price data from the Victorian Valuer-General's office were examined to assess their suitability for constructing a land price index for Melbourne. Wide variations were found in the various measures available and a number of problems and sources of error were identified. A number of tests were devised to assess the accuracy of the data and several alternative index series were constructed. Recommendations are made that might lead to the construction of an ongoing quarterly index.

A Methodology for Constructing Vacant Land Price Indices

Existing estimates of movements in vacant land prices are limited to a few metropolitan areas and infrequent time intervals. This paper develops a new methodology for estimating vacant land price trends for subareas within states and metropolitan areas. It utilizes data from a sales ratio study, a large database available in most states. The methodology uses assessed value to control for “hedonic characteristics” associated with the property and its location. A model is developed to correct assessed value for measurement errors. Statistical results for forty‐one Connecticut towns indicate that the model provides a reasonable compromise between data availability and accuracy of price trend estimates.

Factors Affecting Land Price Decline

Over the fifty years before 1981, land prices increased every year but two, 1961 and 1970, according to the U.S. Department of Agriculture (USDA) index of farmland prices. Both of those declines were only 1%. A third drop occurred from 1981 to 1982. In most years, the land price increased at least as much as the cost of living. Land has provided a moderate current rate of return and has been a good hedge against inflation. From 1959 through 1969, land prices in Illinois increased at 4.2% compounded annually, while the consumer price index (CPI) increased 2.3% annually. From 1970 to 1978, land prices increased at 13% compounded annually, while the CPI increased at 5.8% compounded annually. Land prices peaked near the end of 1980 in the cash grain area of the Midwest. During 1981 prices fluctuated from one quarter to the next, with a general annual decline of 4% to 5% depending on the state (Miller and Benjamin). A survey of ninety farm managers and rural appraisers conducted by the author at the annual meeting of the Illinois Society of Farm Managers and Rural Appraisers in February 1982 indicated a decline of 12.5% in Illinois land prices from the previous year. The range was from 0 to -30%. The USDA land price index showed a 9% decline from 1 February 1981 to 1 April 1982 for Illinois, with comparable declines in other Corn Belt states. The Federal Reserve Bank of Chicago survey showed changes in that district ranging from +1 to -19% from the previous year (Miller and Benjamin). The largest declines occurred in Indiana, Illinois, and Iowa.