2.3.1 urban land market urban land market upa package 2, module 3

2.3.1 Urban Land Market

URBAN LAND MARKET

UPA Package 2, Module 3


The Urban Markets

The dimensions of markets: product; quantity and price. Conditions of land Markets : land for development or transfer, sellers and buyers, open

and free transaction, dynamic price, information intensive, and competition.

Land market mechanism Land tenure system Land policies and government intervention


• Bring buyer and seller together to facilitate transactions

• Set prices for land

• Quantity of land offered for sale equals the quantity of land demanded

• Land prices play an important role in ensuring that land is efficiently used

Urban Land Market Performs Four Functions


Demand and Supply Factors

• Needs,demand and desire

• Direct demand and derived demand

• The law of demand

• Physical supply and economic supply

• Physical land supply can be elastic

• The law of supply


Urban Land Markets in Developing Countries

Understanding land markets in African urban areas: the case of Dar es Salaam, Tanzania

Land markets in urban Africa have not been well studied. There is considerable evidence that most landowners in urban Africa obtain land by way of purchasing it from recognized owners, be they in the planned or in the unplanned sector. A study gives insights into some aspects of the land markets in urban Africa, taking the case of Dar es Salaam in Tanzania as an example.


China's land market:

-- Current situation, problems and development trends..


Recommended Reading:The role and function of land market in market economy --David E. DowallThe Nature of the Market -- Annette HurrelmannThe price of land –- extracted from ‘The Mega-city of Latin American’Is the Real Estate Market Voluntary? -- Fred E. FoldvaryExampleUnderstanding land markets in African urban areas: the case of Dar es Salaam, Tanzania --J. M. L. Kironde


• China's land market came into being to serve the needs of the development of a socialist-market economy. As a result of the reforms and development that have been carried out in the past seven years, China's land market had come into shape as a system.



Land Market and in Urban Economy

• Land is the platform for economic activity.• Land market as the main vehicle to invest,transfer wealth. • Land use allocation influences urban economy.• Infrastructure allocation influences urban productivity.• Land use and infrastructure influence market efficiency.• Urban economy influence land use, land markets.• Land market distortion retard urban economic growth .• Economic productivity related to revenues/costs.• Land market related to urban labour market, capital market.


Reading:

Land Price As A Cause Of Poverty

--Winston Churchill's

Informality, Urban Poverty and Land Market Prices Article

--Smolka, Martim O

Land Market and in Urban Economy


Land Prices and Land Bids

The most important Factors affect the level of land price bids:

• Type of development• Density of development• Location of plot• Cost of construction• Cost of infrastructure• Cost of financing• Taxes• Demand for development• Supply of land• Level of competition


An Efficient Land Market: Characteristics

Efficient ：

The system governing the the land market encourages quick development and transaction of land.

• Government has goals for land development

• Initiative - efficient land registration and land information system

• Active - active supply and demand

• Legislative - Ensured formal land transaction



Equitable:

The system governing the land provides reasonable access to all income groups and individuals.

• Equitable access to land and house• Equitable access to transaction(bid, auction)• Equitable access to credit • Land market transparency• Land policies and government intervention• Remove distorted price and provide affordable house


Environmentally sound:

Protects land source sustainable use for the good of both current and future users

• Ecological sustainability• Environmental remediation• Pollution reduction• Urban greening



Example:

Environmental sustainability, community safety and economic development --Australia 2002

Urban Environment Development of Dalian City, Liaoning Province, China --China 2002



Compatible:

The system governing the land markets is integrated with other laws and regulations governing land.

• Planning—land development strategy • Taxation--development control • Provision of public infrastructure and services -- safe

water provision, sanitation, waste, management and treatment



Example:

• Provision of infrastructure for a Housing Development in Temba

--South Africa 2000• Comprehensive Approach to Urban Developme

nt in Tamil Nadu, India --India 2000• Comprehensive Revitalization of Urban Settlem

ents, Chengdu---China 2000



Requirements for Efficient Land Market

• Well defined property rights• Voluntary participation• Buyers and sellers• Free entry and exit• Information • Similarity of product

Example:

•Trend of Market-Oriented Land Transaction --china 2003

•Structural Changes in the Land Market in Japan --Japan 2002


• Efficient functioning of land markets requires efficient and updated land registration systems which clearly indicate legal ownership of land.

• Land Registration is defined as the process of maintaining a register of real rights in land and includes registers of title and registers of deeds.

• A Land Register is described in some jurisdictions as an Immovable Property Register or as a Cadastre.

Requirements for Efficient Land Market


A poor functioning land market leads to ills :

• Land speculation• Creation of slums and squatter settlements• Environmental deterioration• An inefficient urban development pattern• Adverse affections to urban economy

Distortion of a Poor Functioning Land Market


Example :

Bubbles of Japan Urban Land Markets. – KAZUO SAT0

Land,productive slums and urban poverty

-- Solomon Benjamin

Distortion of a Poor Functioning Land Market


• The process of buying land based solely on its current market price in the hope that future market prices will be higher. It occurs when the demand for land, at the present time or in the near future, outstrips the supply of land.

• Rampant land speculation cause a ‘bubble’ land and property market, where prices of land and property are overprice,drive urban poor out of informal land market, pushing them into squatter settlements, illegal subdivisions and slums.

Land Speculation


• Demand side: Rapid economic growth Lack of opportunities for investigation in other sectors

• Supply side Bottleneck of availability in serviced land from in the land development phase and land transaction phase. -- Slow provision of infrastructure and services -- Poor city planning -- Poor land records -- Cumbersome procedures for buy and sell land or property

Land Speculation


• Economic cost - Increasing the cost of land investment; - Creating ‘bubble’ economy; - Have been blamed for triggering the financial crises

in South East Asia

• Environmental cost - Decreasing of green land - Increasing the amount of water leakage - Increasing the costs of disposing urban waste water

and solid wastes. - Causing traffic pollution and air pollution.

Land Speculation


• Social cost

- Driving the urban poor out of the formal urban land market,

- Causing squatter settlements, illegal subdivisions and slums

- Increasing the cost of living - Causing poor health and entrench the cycle of

poverty.

Land Speculation


Reading:

Land Speculation: What Is It Bad For? --Fred E. Foldvary, 2003

Lessons Learnt from Housing Speculation in Bangkok -- Sopon Pornchokchai 2003

Land Speculation and the Boom/Bust Cycle

Land Speculation


• The various taxes to reduce land speculation in the case-studies is provided in table.

Methods to Reduce Land Speculation

272.3.1 Urban Land Market WP2WP2


Overview of regulations to reduce land speculation1

Bandung Dhaka Hué Makati Penang

Limitation of land

ownership

N.A. Under consideration

N.A. N.A. Limitation on foreign ownership

Property tax on

vacant land

Yes N.A. N.A. Yes Yes

Capital gains tax

3 per cent of gross transfer value

0-20 per cent depending on income level

and/or duration of ownership

5 per cent of gross transfer value or fair

market value (if higher)

Yes

Excess land holding tax

N.A. N.A. N.A. N.A

Betterment tax

Legal provision exists

Windfall tax

Bill under consideration


• Land speculation was a main reason for land being vacant.

• Few regulations which attempted to encourage capital investments on land instead of using land for capital storage and accumulation,

• Available tools typically suffered from poor performance record.

• Almost all case-studies levied a capital gains tax and most applied a property tax on vacant land.

• Not one case-study applied limitations on land ownership or excess land holding tax.



• The collection rate would not be more than 60 per cent of the actual cost.

• The Philippines was the only country where a special tax on vacant land existed and attempts were also being made to collect windfalls profits (unearned increments) to the public sector through a specific tax for this purpose.

• Typically the case-studies appeared to have poor implementation records regarding taxes to reduce land speculation.


2.3.1 urban land market urban land market upa package 2, module 3

Documents

land quantity of land

efficient land market

urban land markets

price of land

chinas land market

land prices

function of land market

urban economy land