Property

Regaining confidence in the land market

Regaining confidence in the land marketChina’s land market appears to pick up in Q4. According to Government’s data, total value of land sales in November reached 16-month high to RMB 66.3 billion, up 23% month-onmonth and 0.4% year-on-year, while average land cost compared with October edged up 18% month-on-month to RMB 2,580 per square meter.

Particularly in those first-tier cities, including Beijing, Shanghai and Shenzhen, all witnessed prominent land sales in November. Of which, Shanghai sold a land plot in northern Huangpu to a joint venture formed by CPIC Property Insurance and Binjiang Development, for a year-high consideration of RMB 2.77 billion, 24.8% higher than the previous record. On the same day, Beijing’s government offered a plot of land within the third ring road for auction, with a starting price of RMB 2 billion, or RMB 33,800 per square meter. Only a few days later, a plot of land in Nanjing, covering a site area of 364,000 square meters, was sold to MCC Real Estate for opening price of RMB 5.62 billion, breaking this year’s land sales price record in China.

Land market had been dull for nearly two years as a result of a slew of curbing measures introduced by the central government in 2010. With local governments being reluctant to slash land prices, total land supply in the first three quarters of this year dropped 12.5% from a year ago, while the failure rate of land auctions climbed up by 3.6 percent to 8.3 percents during the period.

Nonetheless, entering to the fourth quarter, demand for land from developers has been dramatically recovered, due to the bottoming out sentiment in the property market. Thanks to the twice interest rate cuts and other supporting policies, home sales in Q3 have started to rally, absorbing many vacant units and giving developers more cash to replenish their land banks for future development. Some major developers, those with better access to bank loans, are taking advantage of current low land prices, when most of the small developers are still struggling to get funds for their survivals.

Not only big developers turning aggressive in buying up land, local governments, which relied heavily on revenues generated from land sales, have also been trying to boost land supply by offering more quality land parcels to attract developers. Beijing’s government on 27th November put 6 more parcels, about 618,000 square meters on the market, with a total asking value of RMB 3.78 billion. Guangzhou’s launched 11 sites for auction on 30th November. Wuhan’s, after auctioned off 30 and 26 parcels on 2nd and 20th November respectively, announced to further launch 48 parcels (20 residential and 18 commercial) in December, totaling 104 parcels in two months.