1. UPA Package 2, Module 3
URBAN LAND MARKET

2. 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

3. Urban Land Market Performs Four Functions
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

4. 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

5. 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.

6. Urban Land Markets in Developing Countries
China's land market:
-- Current situation, problems and
development trends.
Recommended Reading:
The role and function of land market in market economy
--David E. Dowall
The Nature of the Market Annette Hurrelmann
The price of land –- extracted from ‘The Mega-city of Latin American’
Is the Real Estate Market Voluntary? Fred E. Foldvary
Example
Understanding land markets in African urban areas: the case of Dar es Salaam, Tanzania J. M. L. Kironde

7. Urban Land Markets in Developing Countries
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.

8. 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.

9. Land Market and in Urban Economy
Reading:
Land Price As A Cause Of Poverty
--Winston Churchill's
Informality, Urban Poverty and Land Market Prices Article
--Smolka, Martim O

10. 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

11. An Efficient Land Market: Characteristics
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

12. An Efficient Land Market: Characteristics
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

13. An Efficient Land Market: Characteristics
Environmentally sound:
Protects land source sustainable use for the good of both current and future users
Ecological sustainability
Environmental remediation
Pollution reduction
Urban greening

14. An Efficient Land Market: Characteristics
Example:
Environmental sustainability, community safety and economic development
--Australia 2002
Urban Environment Development of Dalian City, Liaoning Province, China
--China 2002

15. An Efficient Land Market: Characteristics
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

16. An Efficient Land Market: Characteristics
Example:
Provision of infrastructure for a Housing Development in Temba
--South Africa 2000
Comprehensive Approach to Urban Development in Tamil Nadu, India
--India 2000
Comprehensive Revitalization of Urban Settlements, Chengdu ---China 2000

17. 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

18. Requirements for Efficient Land Market
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.

19. Distortion of a Poor Functioning 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

20. Distortion of a Poor Functioning Land Market
Example :
Bubbles of Japan Urban Land Markets. – KAZUO SAT0
Land,productive slums and urban poverty
-- Solomon Benjamin

21. Land Speculation
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.

22. Land Speculation Demand side: Supply 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

23. Land Speculation Economic cost Environmental 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.

24. 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.

25. 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

26. Methods to Reduce Land Speculation
The various taxes to reduce land speculation in the case-studies is provided in table.

27. Methods to Reduce Land Speculation
Overview of regulations to reduce land speculation1
Bandung
Dhaka
Hué
Makati
Penang
Limitation of land ownership
N.A.
Under consideration
Limitation on foreign ownership
Property tax on vacant land
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)
Excess land holding tax 
N.A
Betterment tax
Legal provision exists
Windfall tax
Bill under consideration
Methods to Reduce Land Speculation
WP2

28. Methods to Reduce Land Speculation
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.

29. Methods to Reduce Land Speculation
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.