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. China’s new home prices in June rise fastest in 20 months “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. A campaign begun in late 2017 by the central government to wring risks out of the financial system has led banks, the bond market and non-traditional lenders in the so-called “shadow” banking sector to shun financing to all but the leading 30 to 50 property developers by sales. Because local governments heavily depend on land sales for their budgets, the drop in lands sales could lead to less badly needed revenue. Shanghai scraps land sales worth US$1.5 billion in 20 days as developers lose mood to shop Big cities’ land markets cooled much more than those in smaller cities, the report found. In the first-tier cities, the ratio of failed sales was much higher: 19 per cent in June, compared with 7 per cent in the same period in the second-tier cities. According to E-house China R&D Institute, the average premium above the starting bid for land auctions in first-tier cities was 11 per cent in the first half of the year, down from 21 per cent in the first half of 2017. The premium for second-tier cities is 17 per cent, down from 32 per cent. The China Securities report said the premium has actually fallen. Yet new costs are baked into land sales, the report said. For example, local governments have targeted large flats to ensure more affordable, smaller flats are available. That cuts into profits. Beijing, for example, required developers to ensure at least 70 per cent of units in their projects are smaller than 90 square metres (about 970 square feet). “In some cases, the land prices have even exceeded the surrounding home prices. It is possible that as the prices are hiking, we are getting less interested in acquiring land,” said Wang Cheng, chairman of Fulong Group, a developer based in Hebei. “If the government wants to control home prices, it should start with controlling the land prices.” The average land price as a percentage of unit prices has risen to 62.7 per cent in first-tier cities, from 24.7 per cent in 2014. Of new units in projects that went up for sale this year, most – 64 per cent – were built on sites acquired in 2014 or earlier, while less than 2 per cent were on sites acquired last year, suggesting high land prices have cut into developers’ interest in rolling out stocks for sale. “Some local governments are selling land at an ever rising price. Their greediness is the main reason for so many failed land sales,” said Ouyang Jie, senior vice-president of Future Holdings, a Shanghai-based developer.