Skyrocketing land prices in Beijing and Shenzhen are forcing some of China’s biggest developers to scour for cheaper land in lower-tier cities in northern and western regions, while authorities rein in speculation in some hotter parts of the nation’s property market. Taiyuan, the largest city in the northern province of Shanxi and historical seat of many dynasties, was the top choice in 2019, according to industry researcher Real Estate Foresight, which tracks the nation’s 23 biggest developers. Second ranked was Xi’an, the eastern end of the Silk Road in north-central Shaanxi province and famous for the archaeological site of life-sized terracotta army. Chinese developers picked up 65 pieces of land covering 12 million square metres (129.2 million sq ft) of gross floor area in Taiyuan during the first 10 months of 2019, according to the data analytics firm. They also bought 56 plots of land covering 9.02 million sq m in Xi’an, and 8.9 million sq m in southwestern city of Chongqing. Growth in home prices in China’s bigger cities may push up costs countrywide, think tank says In contrast, they snapped up only 17 pieces of land covering 2.5 million sq m, and two plots in Shenzhen measuring 230,000 sq m, according to Real Estate Foresight. “Major developers now are looking for land priced at a reasonable level in those big second- and third-tier cities where urbanisation is still ongoing and home demand is still robust,” said Robert Cemniak, founder and chief executive of Real Estate Foresight. “One of the reasons that major developers are interested in such cities is that it could yield higher profit” due to the wider spread between land and home prices, he said. Both Shanxi and Shaanxi provinces reported a growth rate above the national average in 2018, according to the National Bureau of Statistics . Shanxi’s real gross regional product rose by 6.7 per cent, while Shaanxi recorded an 8.3 per cent increase. They grew 7.2 per cent and 5.4 per cent respectively in the first half of 2019. The shift away from top-tier cities is also driven by tightening financing and stricter industry regulations for much of 2019 to rein in runaway property prices in some top-tier cities. Last May, the China Banking and Insurance Regulatory Commission banned direct lending to developers before they have secured all necessary approvals to start construction works. The ban was later expanded to include indirect financing through equity and bond offerings, as regulators seek to control credit risks in a slowing economy. Banks were also later asked to step up their scrutiny on loans to developers and mortgages to home buyers. China's November home prices growth eases as fewer cities reported gains amid clampdown New home sales across China grew by 0.3 per cent in November from a month earlier, the smallest gain in two years, the National Bureau of Statistics said last month. Fewer cities reported price gains amid tighter policy curbs. The effect was more pronounced among the nation’s top 100 developers, according to China Real Estate Information Corp, an industry data provider. Their sales grew by only 7.5 per cent in 2019, compared with 35 per cent in 2018 and 40 per cent in 2017. Government, developers in ‘Venice of China’, agree to limit property price gain after sales uptick The attraction is lower-tier cities is obvious, more so for developers facing difficulties in raising additional financing to replenish their land bank, according to E-house China Research and Development Institute. Land for housing development in Taiyuan cost 2,476 yuan per sq m on average in 2019, according to E-house, compares with 2,624 yuan in Xi’an and 2,658 yuan in Chongqing. The average was 21,480 yuan in Beijing and 23,278 yuan in Shenzhen. “Developers are under huge pressure and just cannot afford those expensive lands in cities like Beijing and Shenzhen,” said Yan Yuejin, a director of Shanghai-based E-house. “To survive, they have had to turn to big cities in other western or central provinces that still lag behind top-tier cities.”