LAND AUCTIONS
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China Property

China’s city land sales surge 73 per cent despite cooling measures

Many mainland developers, sitting on piles of cash after achieving record sales last year, are still hungry for land

PUBLISHED : Tuesday, 07 March, 2017, 6:25pm
UPDATED : Tuesday, 07 March, 2017, 10:20pm

China’s land sales in 50 major cities surged 73 per cent in the first two months of 2017 despite a raft of measures rolled out in a bid to cool the red-hot property market.

Fifty city governments received a total of 452.8 billion yuan (US$65.6 billion) from land auctions during January and February this year, up from 262.5 billion yuan in the same period of 2016, Centaline Property data shows.

Second-tier cities including Wuhan in Hubei Province, Hefei in Anhui Province and Nanjing in Jiangsu Province, have led the transactions, with each of their land-sales revenues exceeding 2 billion yuan.

Nanjing last month sold a plot to state-owned China Merchants Land for 9.8 billion yuan, setting a new record for the city.

“Property developers’ enthusiasm for land-buying is still high,” said Yan Yuejin, research director at the Shanghai-based E-house China R&D Institute.

Yan said each land auction has attracted at least five bidders even though the government recently restricted developers to using cash-on-hand to buy plots.

Since late last year, the biggest cities including Beijing, Guangzhou and Shenzhen have introduced price caps in land auctions in a bid to control surging land costs that have been driving up home prices.

Property developers’ enthusiasm for land-buying is still high
Yan Yuejin, E-house China R and D Institute

Developers are also not allowed to use funds borrowed from banks or capital markets to purchase land in the cities with the hottest property markets.

Zhang Dawei, chief analyst with Centaline Property, said the tightened policies have had some effect, as most cities have seen land sold at a lower premium.

But overall, land competition is still heating up as developers concentrate on increasing their footprint in big cities. Many of them are cash-rich after achieving record sales last year amid the property boom.

While first-tier cities have found themselves extremely short of land supply, developers have scrambled to leading second-tier cities to secure quality land resources, said Yan.

He expects some up and coming second-tier cities in central China, such as Wuhan and Zhengzhou in Henan province, where land costs are still low, will attract more developers in the coming months and lead transactions this year.

China has taken different approaches towards land supply in different cities. Some first-tier cities, such as Beijing and Shanghai, have been cutting new land supply to ease population inflows.

In the latest move, the Beijing government’s planned total residential land supply for 2017 was slashed to 610 hectares, from 1,200 hectares last year.

Other cities — those that are not already overbuilt — are adding new land supply to meet the requirements of President Xi Jinping’s “supply-side reforms”.

If excessive land speculation re-emerges, Yan said local governments may have to further tighten measures to control the selling price.

Addressing reporters during China’s annual political meeting known as the ‘two sessions’ at the weekend, Huang Qisen, chairman of Fujian-based developer Thai Hot Group, said Chinese builders’ liquidity will be squeezed compared to last year amid tighter credit restrictions.

It is likely more developers will seek to add land through company or project acquisitions, he said.

China’s land sales have been a major source of government revenue. The country received 3.56 trillion yuan in land sales last year, a 19 per cent year-on-year increase.

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