Appetite for residential plots in mainland China drops to 4-year low in wake of price curbs, deleveraging, group says
Developers have turned cautious over concerns about profitability and tight funding environment.
Chinese developers’ appetite for new land has fallen to the lowest level since 2014, following government curbs on runaway home prices and lending, a new report said.
China Securities Co. looked at land sale data of 300 Chinese cities in recent years. It found that in the first seven months of this year, auctions of 258 plots of land failed to find buyers . That is 59 per cent higher than in the same period of 2014, when a record high stockpile of unsold homes led to a nationwide home-price slump. In all of 2014, 345 plots failed to sell.
In the first seven months of this year, out of every 100 land auctions, six failed to end up with buyers, the report found. That compares to a 4 per cent failure rate in 2014, which itself was the poorest record in the past 10 years.
“In 2014, residential land supply and new home sales slumped, but this is not the case this year. Sales are robust and land supply increased this year. Developers are turning cautious because of the concern over profitability, and tight funding conditions,” said Chen Shen, chief author of the report.
The new data suggest that developers are facing such challenges as getting financing for new land or have decided that curbs on home prices could dent their profit margins.