Land value determination in an emerging market: Empirical evidence from China

Purpose – In this research, the purpose of this paper is to assess the relative pricing behavior for land in Beijing, China. The paper sees this as important for three core reasons. First, China has a strong growth economy but is still in many ways an undeveloped country and thus the paper do not have significant data about asset pricing behavior there. Second, China has not traditionally had a market-based land and property transfer system – thus, it is interesting to assess how prices are determined relative to typical market expectations. Third, the authors have extensive evidence on pricing behavior in the USA and Europe but little such evidence on China – are the same variables important in land pricing in China and are there other unique local variables. Design/methodology/approach – This paper analyzes prices of non-industrial and industrial land separately using a comprehensive data set and a semi-parametric framework. The data and flexible model specification allow the hedonic price coefficients to be estimated more accurately. Findings – The key results are that pricing behavior in general follows the traditional expected variables as determined by size, planning use, location and other neighborhood characteristics. However, the authors also find that land prices are associated with buyer characteristics; for example, foreign investors pay less than local investors. Originality/value – The study fills the gap in the literature in two ways. First, this paper analyzes prices of non-industrial and industrial land separately using a comprehensive data set and a semi-parametric framework. The data and flexible model specification allow the hedonic price coefficients to be estimated more accurately. Second, and more importantly, the authors find evidences that land prices in China are determined by both market force and “Chinese characteristics.” The land market, although established only recently, is at work. In line with the literature, determinants such as size and planning uses are found to be important in determining land prices. This is the author's accepted manuscript. The final version has been published by Emerald Publishing Group in International Journal of Managerial Finance here: http://www.emeraldinsight.com/doi/abs/10.1108/IJMF-03-2012-0033