Land Prices and Fundamentals
weighted-average land price indicators; discounted present value of land; cointegration analysis; error-correction model
This paper examines the long-term relationship between macro economic fundamentals and the weighted-average land price indicators, which are supposed to be more appropriate than the official land price indicators when analyzing their impacts on the macro economy. In many cases, we find the cointegrating relationships between the weighted-average land price indicators and the discounted present value of land calculated based on the macro economic fundamentals indicators. We also find that the demographic factor has impacts on real land prices. The error-correction analysis using the cointegrating relationships shows that not only the changes in the discounted present value of land, but also the changes in the demographic factor and bank lending have an influence on the fluctuations of real land prices. Based on the analysis, the recent change in the trend of land prices in Japan is explained by the increase in the discounted present values of land in the accommodative monetary environment, the convergence of the actual land prices to the long-term equilibrium level, and the changes in bank lending.