Mainland developers have returned to buying land aggressively following the unexpected rate cut. The rate cut last month, coming as it did amid ongoing easing measures to help the property sector, is seen by developers as a sign of Beijing's policy shift, prompting them to aggressively bid for land to beef up their land banks. "Developers' appetite for replenishing land has improved because there's a clear change of policy direction," said Alan Jin, an analyst at Mizuho Securities. The People's Bank of China's easing of mortgage loans on September 30 was the first turning point on the policy front, with the rate cut announcement cementing easing expectations, according to Jin. With the steady increase in home transaction volumes, he said, "developers believe the worst is behind them". Just two days after the rate cut, Yuexiu Property bought a 147,736 square metre site in Guangzhou's Baiyun district for 6.45 billion yuan (HK$8.13 billion) or 9,900 yuan per buildable area. The site could yield a total gross floor area of 648,912 sq m, making it the most expensive piece of land in the district. In Shanghai, a wholly owned subsidiary of mainland developer Yango Group paid 2.11 billion yuan, or 41,078 yuan per buildable square metre, for a residential site on Wednesday, again the most expensive plot sold in Shanghai in terms of unit cost. "Land prices will continue to go up in key first and second-tier cities. In first-tier cities, home purchase restrictions are not a major hurdle for sales recovery," said Johnson Hu, a property analyst at CIMB Securities. Beijing, Shanghai, Guangzhou and Shenzhen still outlaw owning a third home while almost 40 cities have relaxed or scrapped such restrictions in the past four months to help the struggling property market. "There is abundant housing demand from the middle class, who are looking to upgrade in major cities," he said, adding that he expects the government's policy stance would be more positive than negative towards the property sector. "The country is facing an economic downturn. Last year, first-tier cities witnessed a price surge but the central government did not introduce any policy to curb the rally. This administration no longer strictly controls home prices and will leave the market to adjust itself unless there is a surge in home prices nationwide. The government will divert its attention to social housing and maintaining healthy economic growth," Hu said. Average land prices in the first-tier cities have soared 42 per cent to 11,160 yuan per sq metre so far this year, according to a report by Venant Chiang, a property analyst at Jefferies. The lifting of home purchase limits and sales recovery helped developers regain confidence in second-tier cities, with land prices growing 17 per cent to 3,073 yuan per sq metre, but Chiang sees a 13 per cent correction in third-tier cities as they are still suffering from over-supply. "The development margin is unlikely to improve as land price appreciation significantly outpaces average selling price."