Manhattan, Way Cheaper than Beijing: Are US Speculators Enfeebled?
|December 3, 2013||Posted by Staff under Economic Principles, High Cost of Land|
This 2013 excerpt of Quartz, Spt 6, is by Gwynn Guilford.
Chinese local governments hit the jackpot this week. In Beijing, Shanghai, Hangzhou and Suzhou, land parcels sold for record prices, crowning a slew of new “land kings,” as Chinese slang refers to record-setting plots.
In Beijing, a residential land parcel near the city’s embassy district commanded 73,000 yuan ($11,900) per buildable square meter, or about $1,100 per buildable square foot. For comparison, the most expensive property deal in Manhattan in 2013 fetched $800 per buildable square foot; the average for 2012 was $323.
Why is Beijing more expensive than Manhattan?
Is Beijing supply scarce? Actually, it could mean the opposite. Price rises could be due more to speculation than to a dearth of supply. Even though swanky high-rises are getting more expensive in Beijing, their sales in smaller cities are flagging, suggesting that genuine demand is weak.
Per capita housing stock hit 35 sq m in 2011, and is rising by 1.2 sq m a year, putting China in the same league as many wealthy countries. Demand in mega-cities like Beijing and Shanghai can probably absorb any excess supply. But oversupply is already hitting smaller cities, and as demand flags, prices there have started to fall.
Ed. Notes: Sure, speculators add their bids to demand and keep some of their land out of supply — that’s a big part of the story. The other part is population density. Nowhere is denser than China. Close to 1 of 5 humans are Chinese and China is smaller than America. All those people needing sites for homes and business push up location value sky-high.
While that’s a curse for those who can’t afford the land, it needn’t be. All government need do is not sell land but lease it and renegotiate the leases after short periods of time. The land it already sold it can tax or levy land-use fees or charge Land Dues. Doing that would drive out the speculators. With the revenue, government could pay a dividend, as does Singapore, and that’d enable residents to afford to live there. Then as ground rents rise due to true demand and/or limited supply, the increases in spendiness would benefit everyone.
Following such a geonomic policy, Beijing would be ahead of Manhattan in more ways than one.