Why land prices keep rising?

The frequent appearance of land kings, is pushing already high prices even higher. But what other factors are affecting the market?

The Chairman of the Huayuan Group board, Ren Zhiqiang believes after China adopted a bid system for land sales in 2003, less land became available.

Ren Zhiqiang, Chairman of Huayuan Group, said, "In 2007 the supply increased a little bit. But under another raft of control policies issued at the end of the year, the supply of land dropped fast. In 2008 and 2009, the supply was at a very low level. And now the demand is greater than the supply."

According to Li Xiaoning, a property veteran, some developers push auction prices up so they can promote the sales of their housing programmes in the same city.

Li Xiaoning, Chairman of Reality Consulting Firm, said, "Last year, a developer in Beijing bought a parcel of land for a record-high price. Then, the company instantly raised the price of its 6 housing programmes in Beijing. Many developers which run many programmes in the same city are adopting this method to push up prices."

Purchasing when the price is high brings more than a price hike for property developers.

Lai Weimin, Expert, said, "Developers may not aim at the profits of land sales when they pay highly for a parcel of land. Instead, they may want to speculate on the stock market."

The unbalanced relationship between land supply and demand as well as developers' speculations contributes to the land king phenomenon.