Land auction sales decline 53pc
The amount of land sold at government auctions in 60 major mainland cities plunged 53 per cent last month from a year ago as cash-hungry developers became more cautious and put the brakes on acquisitions.
With most developers missing sales targets amid the market slump and tighter control on lending, market watchers believe state land auctions this year will continue to generate lacklustre buying interest.
Local governments in those major cities sold 254 sites last month compared with 538 a year ago, according to data monitored by Soufun's China Index Research Institute.
The tepid response to the auctions and speculation the property sector might miss out on a government stimulus package put property stocks under selling pressure yesterday.
Shares of Guangzhou R&F Properties dropped 6.33 per cent to HK$6.51, Agile Property Holdings fell 5.39 per cent to HK$2.81 and Shimao Property Holdings declined 5.45 per cent to HK$4.16.
'Developers are unlikely to buy land this year, as they have been sitting on large, costly land banks,' said Albert Lau, the managing director of Savills Shanghai.
As credit lines dry up and demand slackens for housing, Mr Lau said, developers would slow their pace of construction.
'With the market getting worse, developers will build less, in order to minimise investment risks,' he said.
Wang Shi, the chairman of China Vanke, the largest developer on the mainland, conceded yesterday 'the firm's cash-flow pressure mainly came from its wrong investment strategy of paying record prices for several sites two years ago'.
Since the start of the global financial crisis, a large number of sites have been withdrawn from auction because of the lack of bidders.
The China Index Research Institute said the number of sites withdrawn from auctions now totalled 150 in Shanghai, a favoured investment destination among domestic and foreign developers.
Meanwhile, local governments also released fewer sites for auction last month, with only 522 plots on offer, down 37 per cent from a year ago.