Shanghai bucks trend as China land demand sinks

LAND demand from China's developers mostly decreased in the first round of auctions held by major cities this year, with fewer cities seeing price gains, but sales in Shanghai rebounded following its exit from a Covid-19 lockdown.

Regulators in 2021 started limiting land sales in 22 large cities to 3 rounds a year to control prices, while curbs on borrowing squeezed already indebted developers, weakening their appetite for land since the middle of last year.

Nine of the 20 cities that have concluded their first round of 2022 land auctions saw higher average prices, Reuters calculations based on public notices found.

That compares with 11 cities that saw price gains in the third round of the 2021 auctions.

Zhengzhou and Shenyang, 2 provincial capital cities hard hit by China's property downturn, have yet to hold even their first-round auctions, reflecting weak expectations for sales.

Shanghai, which concluded its auction on Wednesday (Jun 8), rebounded after exiting a 2-month lockdown, with all of the 36 lots on sale sold in China's biggest city by economic output.

Prices averaged 2.32 billion yuan (S$477.2 million) per lot, up 33 per cent from Shanghai's last sale in 2021.

Developers are willing to purchase land in Shanghai as "there is a large profit margin between the land price and the selling price of new homes," said Lu Wenxi, chief analyst of property agency Centaline.

Still, state-owned developers led the sale, buying 30 of the lots, with cash-strapped private developers cautious on new land purchases.

To spur sales, Shanghai had relaxed some curbs on bids after a temporary suspension of land auctions in late March when a local Covid-19 outbreak started to escalate. REUTERS