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Mainland property developers surge as major Chinese cities prepare to alter land auction system

  • China Resources Land, Country Garden led gainers in Hong Kong as major cities to limit land sales to three times in 2021
  • Move seen as positive to lowering acquisition cost, improving margins and gearing for stressed developers

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China Resources Land led a surge in mainland Chinese property developers on the back of impending change in land-sale method in large cities. Photo: Getty Images
Zhang Shidongin Shanghai
Shares of mainland property developers surged on optimism a centralised land-sale programme to be adopted in major Chinese cities this year will help lower acquisition costs and improve their gearing.
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China Resources Land jumped 11 per cent to HK$36.65 on Thursday, leading the charge among peers listed in Hong Kong. China Overseas Land and Development and Country Garden climbed more than 7 per cent. A gauge tracking mainland-listed developers surged 6.2 per cent, with China Vanke and China Fortune Land surging by the 10 per cent daily limit.

Some 22 cities including Beijing, Shanghai and Shenzhen will limit the number of land sales this year to three times while raising supply for bidding at each auction, according to a research note by Shenwan Hongyuan Group, citing a notice from the Ministry of Natural Resources. The cities of Qingdao, Tianjin and Zhengzhou have earlier notified the industry of the change from current random auction practice.

“The new land sale rule will help improve the profit margins of the property industry and promote the healthy development of the sector,” said Zhu Jin, an analyst at CSC Financial.

Chinese developers and the central bank's three 'red lines'
Chinese developers and the central bank's three 'red lines'
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The government in August introduced the so-called three red lines of leverage guidance to prevent default risks among builders. Policy easing by the central bank to cushion the impact of Covid-19 pandemic have since fuelled asset prices from properties to stocks. Prices of new homes in 70 major cities rose 0.28 per cent in January from December, the government said on Tuesday. Secondary market prices rose 0.37 per cent, the most in 18 months.
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