Land sales pick up following easing measures
Land sales in mainland China recovered slightly last month following the introduction of easing measures across the country.
Beijing, which finished its first round of land sales on February 16 and 17, earned 48 billion yuan (HK$59.4 billion), or 73 per cent more than the third round last year.
Land in China can only be sold three times a year, according to a scheme introduced by the central government early last year.
“We saw fewer plots withdrawn and an increase in premiums, which suggests that the market is warming up again slightly,” said Shen Meng, a property analyst with Southwest Securities.
The slight improvement came after the central and local governments unveiled easing measures to boost real estate sector sentiment. These measures were prompted by the withdrawal from sale of about a third of the 700 parcels of land put up for tender across the country since September last year.
Cash-strapped developers, hit by curbs introduced to keep their borrowing in check, had shown little interest in spending big on land.
Some major developers have failed to pay debt since late last year, prompting the tightening measures.
To stop the cracks in the sector from widening, Beijing cut the mortgage rate and took the loans developers used for mergers and acquisitions out of the calculation of their debt. Local authorities eased policies to help the real estate industry recover.
Earlier last month, Heze became the first city in Shandong province to introduce easing measures, with four major banks lowering the minimum deposits for home purchases to 20 per cent from 30 per cent.
Within the next two weeks, eight more cities including Nantong in Jiangsu province and Foshan, part of the Greater Bay Area, lowered their down payment requirements.
“The local governments likely faced mounting pressure to stabilise the property market,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, pointing to a 72 per cent drop in land-sale proceeds in January.
Land sales are a major source of cash for local authorities.
“This is important, as land sales accounted for around 43 per cent of local government revenue in 2021,” Zhang said.
Yan Yuejin, director of Shanghai-based E-house China Research and Development Institute, said the easing gave developers more room to spend on land. “Thus, we will see a more brisk land market in the coming months.”
Of 18 plots put on sale in Beijing last month, 17 were bought by different developers. The premium on reserve prices on average was 4.5 per cent. In comparison, during the last land auction in Beijing, only 11 plots were sold at a 1 per cent premium.
In Shanghai, the local government said last week that it would offer 40 plots for sale in its first round of land sales later this month. In the final round last year, the city offered only 27 plots.