China's land auction premiums rebound as credit taps reopen to developers
- The residential land price premium rose to 23.7 per cent in March, up from 10 per cent in February, according to property consultancy China Index Academy
- In March, second-tier cities reported a 46 per cent jump in average prices for land sold at auction compared to a year earlier
Chinese developers have become more aggressive in acquiring land at auction in second-tier cities, emboldened by improved financing and a stronger sales outlook.
The average land auction premium over starting bidding prices in 300 major Chinese cities monitored by property consultancy China Index Academy rose to 23.7 per cent in March, compared with 10 per cent in February.
The average land premium among second tier cities reached 24 per cent during the month, while average land prices jumped 46 per cent from a year ago, the property consultancy said.
Only 4.4 per cent of land slated for auction failed to find a buyer in the first quarter, compared to 12.1 per cent in the fourth quarter, according to Nomura Securities.
“Land sales are a leading indicator that shows developers’ appetite. The recovery is two or three steps ahead of property construction and new home sales,” said Xie Haoyu, a property analyst with Guotai Junan Securities.
Other analysts pointed to surging land prices in smaller cities, saying it was rare to see any failed land auctions.
“The key reason is that liquidity became abundant starting in January, and what battered developers last year – cash flow pressure – seems to be behind us,” Ding Zuyu, co-president of property agency E-House, said.