Land Market Remains Red-hot Despite Weakened SalesChina’s land market gets more bustling entering 2014, with a number of record high prices transactions making headlines frequently in recent months.

Increasing land supply has been one of the main measures to contain home price inflation over the past few years, but that effort seems to have been hampered as land prices continue to rise anyway. According to a statement from the Ministry of Land and Resources, average land price of residential land in 105 cities across the country was RMB 5,033 per square meter in the fourth quarter in 2013, up 2.6% from last quarter and up 9% compared with a year ago. It was the seventh consecutive quarter of growth.

Top-tier cities, Beijing, Shanghai, Guangzhou and Shenzhen, recorded a total land sales value of over RMB 81.9 billion in January, up 140% from the same period a year ago. Of which, Beijing placed 49 plots of land up for sale during the first two months, fetching a total of nearly RMB 64 billion. It was over one-third of the City’s record land sale revenue of RMB 183 billion in 2013.

Media reported that China’s top 10 real estate developers, led by Vanke and Poly Property, spent a combined RMB63.9 billion between January 1 and February 17 in 2014. Competition for prime locations in big cities are even more intense, with about RMB 37 billion, or 58% of their purchases were for land in major cities, including Beijing, Shanghai, Guangzhou, Shenzhen and Hangzhou.

In Shanghai, Franshion Properties acquired a prime residential land in the Daning area of Zhabei District for RMB 10.1 billion in late January, translating into an accommodation value of over RMB 47,609 per square meter – a new record high in Shanghai. It was nearly 112% higher than the reserve price and was even higher than the current selling price of new homes of RMB 45,000 per square meter in the area.

Even foreign developers are rushing to the market. On January 23, Silverstein Properties, developer for the World Trade Center in New York, secured a land plot in Qianhai, Shenzhen for RMB 13.4 billion. The 51,416 square meter site is approved for mixed-use development and the accommodation value stands at RMB 28,092 per square meter. It was the most expensive plot of land ever sold in Shenzhen in terms of both the total value and accommodation value.
On the contrary, high vacancy rates and slowing sales have prompted developers to lower their land reserves in third and fourth cities. Despite more local governments relaxed their house purchase restrictions in the latter half of 2013, housing market in small cities, mostly located in Inner Mongolia and the northeast, remained quiet and many homes are left vacant. Market observers believe it would take years for the market to digest all of the empty apartments.