The spatial interrelationship between housing and land prices: Evidence from China

The interrelationship between housing and land prices has long been a puzzle in China. Using a panel dataset of 286 prefecture-level cities from 2011 to 2020, we construct a spatial simultaneous-equations model and estimate it with the feasible generalized spatial three- stage least squares (FGS3SLS) approach. Results show significant mutual causality and spatial spillovers between housing and land prices. A 1% rise in local housing prices increases local land prices by about 0.71%, with a comparable effect from neighboring housing markets. Regional heterogeneity is evident: the housing-to-land price effect is strongest in western cities (0.93%) and weaker in eastern cities (0.53%), reflecting differences in local government incentives and market structures. By capturing both bidirectional causality and spatial-temporal variation, this study offers new evidence on the mechanisms linking housing and land markets and provides insights for regionally differentiated housing and land policies in China.