Slide in land sales persists as China’s property developers pushed to the brink

LAND sales across China have fallen to their lowest levels in years, with a nearly 20 per cent decline in 2024, underscoring the persistent struggles in the property market that are crippling the ability of developers to expand.

As of Dec 29, land sales in 300 Chinese cities totaled only 1.38 billion square meters (sq m), a 16 per cent year-on-year drop, according to property data provider China Index Academy.

While figures from institutions differ slightly due to varying methodologies, all point to a significant drop. China Real Estate Information Corp (CRIC) had projected a 17 per cent fall in annual land sales, bringing the total to 1.1 billion square meters. As of Dec 20, only 1.03 billion square meters of land sold, it said.

According to CRIC, before 2021, when China’s property market was on an upward trajectory, annual land transactions consistently exceeded 2 billion sq m.

Since the third quarter of 2021, an escalating liquidity crisis and plunging property sales have pushed developers to the brink, forcing them to scale back investments and land purchases to ensure survival.

Land sales have cooled nationwide in recent years as developers scramble to reduce debt and offload assets.

Meanwhile, property sales continue to fall. According to the National Bureau of Statistics, property sales totaled 1.1 billion square meters in 2023, down from 1.4 billion sq m in 2022 and 1.8 billion sq m in 2021, which was a record high.

A CRIC report issued on Dec 26 suggests that land transactions in 2024 are nearing the level of new home sales in 2023.

Considering the land sold also includes non-saleable portions such as those reserved for public facilities and affordable housing, the supply of land for saleable residential properties may fall short of the transaction volumes for new homes, indicating the start of a new de-inventory cycle in the industry.

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By the end of 2024, several cities had seen a surge in land sales. In Wuhan, for example, 30 parcels of land were sold on Dec 26, including 22 residential plots, at a total of 21 billion yuan (S$3.93 billion) – the highest of the year.

Notably, five plots sold at a premium, with three residential parcels seeing a premium rate between 0.92 per cent and 20.28 per cent.

Wuhan’s land sales for December alone totaled 41.8 billion yuan, surpassing the combined sales from the previous 11 months, according to China Index Academy.

A senior executive at a listed real estate firm told Caixin that, aside from a few premium plots, most of the land in Wuhan’s auction was bought by local government-backed investment vehicles. “By year-end, local governments are eager to meet their land transfer targets,” he said.

In late November and early December, both Beijing and Shenzhen broke local records by selling two parcels of land at record prices.

While market sentiment remained weak during the first three quarters due to slow property sales, the appetite of developers for land revived after September as central and local authorities stepped up supportive policies to shore up the housing market, several industry sources told Caixin.

New home prices in the four first-tier cities stabilised in November, ending a 13-month streak of month-on-month declines, NBS data showed.

Despite the positive signs, the real estate executive said the land market has not yet recovered. In 2024, the revenue from land sales in key cities has fallen by 30 per cent to 40 per cent, with some regions seeing declines of up to 50 per cent.

According to data from the Ministry of Finance, local government revenue from land sales amounted to 3.3 trillion yuan in the first 11 months, down 22.4 per cent from the previous year.

As home sales remain sluggish, developers are cautious about embarking on new developments. CRIC data revealed that from 2023 to mid-2024, the overall construction startup rate for residential land in 30 major cities was only 47 per cent, indicating that a significant portion of land lay idle after sale. CAIXIN GLOBAL