According to a new circular on enhancing land management issued by the State Council on September 5, land use is to be restricted, a move widely expected to drive prices up by as much as 50 percent. However, minister of land and resources, Sun Wensheng, said that such potential price hikes are still within manageable limits, according to an International Finance News report yesterday.

As a result of large-scale urbanization and industrialization, per capita amount of cultivated land in China has fallen to 1.4 mu (15 mu = 1 hectare), less than 40 percent of the world average. In addition, new restrictions on land management and steady heavy investment in the real estate sector contribute to escalating prices.

According to Sun, land prices in China can be categorized as follows: acquisition costs, including compensation for requisitioned land; investment or development costs; and government profits, made up of land-use fees, taxes levied for the utilization of cultivated land and other similar charges.

Gan Cangchun, director of the policies and regulations department under the Ministry of Land and Resources, indicated that the new measures will boost all three categories of pricing by up to two times.

Average cost prices will increase by between 33 percent and 50 percent, with increases corresponding to the purpose of land use. Prices for land for residential use will be kept stable, and are expected to fluctuate somewhat only in the smaller cities. Prices for land for industrial use will be raised by between 40 percent and 60 percent.

Land is currently sold via a public bidding system that is regulated largely by the industry. According to the report, there are concerns that housing prices will rise despite any attempts to keep them largely stable. It is a simple matter of demand and supply. If less land is made available for construction, prices are bound to increase.

Further, Yan Jinming, a land management expert from the Renmin University of China, has warned that some investors might capitalize on the "land shortage" issue to drive prices up. 

(China.org.cn by Wang Ke, September 12, 2006)