China to boost land supply for housing in mega cities

PUBLISHED : Wednesday, 26 February, 2014, 5:24am
UPDATED : Wednesday, 26 February, 2014, 5:54am

The mainland will increase land supply for property development in mega cities this year, the land ministry said on Sunday, as the country's frothy housing market showed some initial signs of cooling down.

The prospect of increased land supply is at odds with the interpretation placed in the market on a recent circular from the ministry that noted: "Except for land to be used for living and public infrastructure, we will basically no longer arrange new land supply for construction in the centres of mega cities with populations over five million."

Dong Zuoji, head of planning at the Ministry of Land and Natural Resources, told state radio that land for property development fell under the category of land for living and public infrastructure, not land for construction.

"We will increase land supply for property development in 2014, including in mega cities with populations of over five million," he said. "In fact, these cities are where the main increase will be."

The clarification is in line with plans by the central authorities to increase property supply as the main measure to contain housing inflation, since other steps taken in the past decade to curb demand have failed to do so.

However, industry analysts voiced concerns over the practical feasibility of sustaining large land releases in big cities where most of the land has already either been sold or developed.

Land supply for property development grew 26.8 per cent last year to 200,000 hectares, pushing up local government revenue from sales to a record high of over 4 trillion yuan (HK$5 trillion).

"Local governments, not the ministry, have the final say on how much land cities will actually sell each year," said Lu Qilin, research head of consultancy Shanghai Deovolente Realty.

"They tend to increase land supply when the housing market booms and will probably cut supply in the second half of this year as the housing market will likely cool down."

Bei Fu, a real estate sector credit analyst at ratings agency Standard & Poor's, cautioned that the market boom of last year was unlikely to be repeated this year as monetary conditions were not supportive.

There are already some initial signs of a cooling down in the market, with official data on Monday pointing to easing annual housing inflation in 70 major cities. A number of new projects in Hangzhou and Changzhou also began offering price discounts over the weekend.

CRIC, a unit of real estate services firm E-House (China), predicted that other cities under heavy inventory pressure such as the northeastern cities of Changchun and Shenyang will offer discounts to speed up sales.

Chinese developers, armed with cheap funds raised offshore before the US tapered its massive bond-buying programme, have been snapping up land parcels in top-tier cities such as Beijing, Shanghai, Shenzhen and Guangzhou since last year.