Reflection on Housing Prices from Subway Construction

From the first-tier cities such as Beijing, Shanghai, and Guangzhou to the capital cities of Nanjing, Shenyang, and Chengdu, and to second and third-tier cities such as Suzhou and Foshan, subway construction is ushering in a new peak period. According to relevant statistics, before this, 33 cities in mainland China had planned rail transit construction, of which 28 cities had been approved.

The construction of the subway is used to communicate with the city. The construction of the subway in the early stage is concentrated in the center of the city and communicates with the north and south of the city. It consists of two lines or a ring line. The next step in the construction of the subway is to enhance the connection between the city center and the suburbs (development area, university city) and expand the scope of the city. It is mainly scattering that spreads around the city. The construction of the subway in the early stage facilitated the travel time of the citizens in the urban area, and the travel time was shortened from one hour to half an hour, which promoted the development of the core CBD. Especially where the two lines interweave, the advantages of transportation are particularly obvious. In other places along the line, the value of commercial land and residential houses has also been greatly improved. When the subway develops to the second stage of development, this stage can shorten the travel time of residents from 2 hours to 1 hour. If you draw a circle around the city, then the range of one hour of life and two hours of life will be four times the range, which means that the construction of the second phase of the subway can expand the size of the city by four times. Economics is scary. When the size of a city is four times, will the land price in the city be so high?

The author believes that most cities will not. In addition to first-tier cities such as Beijing, Shanghai and Guangzhou, these cities can be said that if land prices fall, someone will follow suit. Because these cities are scarce in all of China, it is difficult for cities to change this fact. But for other second- and third-tier cities, the construction of the subway can be said to be the end of urban housing prices. There are only two problems. One is that the cost of demolition caused by the aborigines' expectation of high demolition fees is too high, and the other is that the cost of selling land by the government is too high. As a result, developers may not dare to develop, or develop a small amount, the price is still high. Xiao Bian also believes that the high profits of housing enterprises do not lie in house prices, but rather in the capital operation mode of housing enterprises. This model allows housing companies to use debt leverage to quickly expand to a higher rate of return. However, this model makes the cash flow of the housing enterprises extremely tight. The change in the credit policy of the housing enterprises will affect the normal operation of an enterprise and will be detrimental to the normal development of the entire real estate industry.

Finally, the author believes that the regulation of house prices should not be based on the credit policies of housing enterprises and the price limit of housing prices. Instead, they should increase the taxes and fees for holding the links, carry out fiscal and tax reforms for local governments, and promulgate institutional regulations for demolition.