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Chinese developers to remain cautious on buying land

Mainland developers will likely remain cautious when bidding for land parcels in the second half of the year, even though property sales may recover and local governments plan to increase land supply.

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Tian Ming, chairman and founder of mainland developer Landsea Group. Photo: SCMP Pictures

Mainland developers will likely remain cautious when bidding for land parcels in the second half of the year, even though property sales may recover and local governments plan to increase land supply, industry analysts said.

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The land market started this year in a frenzy, buoyed by record property sales in 2013. However, it cooled off in the second quarter as developers conserved cash in anticipation of a deepening market downturn.

"The land market has not bottomed yet," said Tian Ming, the chairman and founder of mainland developer Landsea Group.

He anticipated opportunities later this year or even next year as the unfolding market correction would probably last three years, he told the .

Evidence of the trend can be seen in the numbers at China Vanke, the country's biggest developer by sales. In the first half, it spent 11 per cent of contracted sales revenues to replenish land reserves, down from 34 per cent last year.

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Vanke's land spending shrank to 11 billion yuan (HK$13.8 billion) from 28 billion yuan during the period, while contracted sales bucked the trend and jumped to 101 billion yuan from 84 billion yuan.

Looking ahead to the second half, "developers will pick up their interest in buying land but will remain cautious", real estate consultancy E-House (China) said in a report last week.

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