Developers are back in the market to rebuild mainland land banks run down during a two-year freeze imposed on new investments in response to government austerity measures and declining sentiment. Their return has been triggered by signs of a rebound in demand and balance sheets, bolstered by strong flat sales recorded in the first four months of the year. As a result, heavyweights at home and abroad have regained their appetite for land in first and second-tier cities, with Hong Kong-listed developers such as Hang Lung Properties and Shimao Property Holdings; and mainland-listed firms Greenland Group and Gemdale Corp paying a combined 3.6 billion yuan (HK$4.09 billion) for sites in Dalian, Qingdao and Shanghai. 'The investments give a strong signal that it is buying time again as the recent recovery in transaction volumes will create greater upside for land values,' said Raymond Ngai, of JP Morgan Securities. Since most developers have now seen accelerated property sales, they will be facing a potential shortfall in developable land. In the first quarter, sales of residential sites had already risen 8.2 per cent year on year across the nation, the National Statistics Bureau said. Nationwide, local governments that generated up to 30 per cent of their revenue from land sales had been quick to respond to the new sentiment by releasing more land and offering various incentives to attract more buying interest from developers, Mr Ngai said. Speculation was also mounting that the State Council would likely relax restrictions on registered capital for property projects from 35 per cent to 30 per cent to ease the financial burden of developers, he said. 'It will encourage more developments,' Mr Ngai said. Albert Lau Tak-yeung, a managing director at property consultant Savills in Shanghai, said the reserve price for sites put up for auction had been marked down significantly to lure developers back to the market. 'Last year, half the land put on sale was withdrawn because there was no bidding. Now land values are returning to more rational levels,' he said. Greenland last week won a 186,000 square metre residential development site on the outskirts of Shanghai for 957 million yuan, about 36 per cent above the floor price of 703 million yuan. But this was about 30 per cent below the reserve price for the same site a year ago, when it was withdrawn for a lack of bidders. Next month, a 15.95 hectare residential site in Qingpu district, Shanghai, will be auctioned at a floor price of 282.62 million yuan. Last November, the site was offered for auction at a floor price of 478.28 million yuan but was withdrawn because of the absence of bidders. However, Hang Lung says it will be more active in seeking acquisition opportunities in the future. 'We will add one or two more sites this year,' said executive director Terry Ng Sze-yuan. The company, headed by Ronnie Chan Chichung, last week made its first acquisition in two years - a commercial site earmarked for a 'world-class' shopping centre in the city centre of Dalian for 1.2 billion yuan or 3,382 yuan per square metre. A survey released by the Ministry of National Land and Resources last month said mainland land prices had declined for the first time in eight years in the first quarter. It said the composite land price for commercial, residential and industrial areas in 35 leading cities averaged 3,189 yuan per square metre, a 2.25 per cent drop from a year earlier. A survey conducted by Centaline (China) found the number of sites being sold above floor prices had risen in Beijing, Shanghai and Tianjin since March, reversing the trend last year when most land was either sold at an opening bid or withdrawn for a lack of bidders. 'This confirms developers' positive views towards the market outlook after robust transaction volumes registered in the first quarter,' said the report. In March, a total of 16 sites were sold in Tianjin at between 3 million yuan and 4 million yuan above the floor price, while a site in Beijing was sold at 66.2 million yuan, about 25 per cent higher than the reserve price, the report said. The trend begun in March is showing no signs of abating. Last week Gemdale outbid nine other competitors to clinch deal for a 83,645 sq metre residential site in Qingpu district for 560 million yuan, which was about 82 per cent above the floor price.