China land sale revenue falls despite easing of home purchase curbs

Moves by 36 mainland cities to ease home purchase restrictions failed to avert a broad-based slide in valuations at local government land sales last month.

Revenue from land sales in 300 cities tracked by a data provider dropped 15 per cent from June. The announcement of a reduced take from land sales - a key revenue source for city governments - comes after a mainland newspaper reported that 36 of the 46 cities that had imposed purchase curbs had rolled them back - officially or on the quiet.

Three first-tier cities - Beijing, Shanghai and Shenzhen - were among the other cities holding firm on the restrictions, the 21st Century Business Herald reported. The second-tier cities that also retained a ban on purchases of more than two homes were Nanjing in Jiangsu; Zhengzhou, Henan; Harbin, Heilongjiang; Foshan, Guangdong; Yinchuan, Ningxia; and Taizhou and Yongkang in Zhejiang.

Home sales in some cities have rebounded after the easing of the curbs.

However, Evergrande Real Estate, the mainland's third-largest developer, yesterday said its contract sales dropped 17.6 per cent last month to 10.8 billion yuan (HK$13.58 billion) from June, with average selling prices falling 14.4 per cent to 7,145 yuan per square metre.

Glorious Property suffered a steeper decline, with its July sales dropping 46.9 per cent to 100.4 million yuan from June. They plunged 71 per cent in year-on-year terms.

Alan Jin, an analyst at Mizuho Securities, said some cities saw a notable pick-up in sales after the easing in purchase restrictions, but a trend was yet to take hold. "But overall, we believe volume will be better in the second half on the back of the easings on policy and credit fronts, as well as improved affordability thanks to continued price cuts by developers," he said.

Jin expects the market to stabilise in the second half in terms of volume of transacted space, which dropped 7.8 per cent year on year - to 424.8 million square metres - in the first half.

"That said, housing price would continue to drop in the rest of the year. Probably we would see signs of stabilisation regarding price cuts by year-end. But volumes should stabilise earlier than that," he said.

High local government debt levels add a sense of urgency to a recovery in the property market. The 15 per cent drop in land sales by the 300 cities monitored by China Index Academy brought the take down to 147.5 billion yuan in July.

"We are unlikely to see a warmer housing market in the short term and we see no significant improvement for performance in the land market," said Chen Guoqiang, deputy head of the China Real Estate Society.