(Yicai) June 6 — As China’s real estate market makes signs of a recovery, developers are showing renewed interest in buying land, especially in core cities where transactions with high premiums are becoming more common. But overall, the land market is still uneven, with most of the action driven by large state-owned developers, according to market insiders and data reviewed by Yicai.
Beijing, for example, had its busiest day of the year so far for land auctions yesterday. Four plots sold for a combined total of CNY13 billion (USD1.8 billion). The day before, a plot in the capital’s Tongzhou district sold at its reserve price of CNY7.49 billion (USD1 billion), setting a new record for the price of a single residential plot in the district.
The land market in other big cities is also on the upswing. Land sales revenue from residential plots in 300 cities surged over 20 percent in the first five months year on year, according to data from the China Index Academy. The top 100 developers spent a combined CNY405.2 billion (USD56.4 billion) on land over the period, a jump of 28.8 percent from last year.
With the market heating up again, there are more expensive plots selling for high premiums. On May 29, for instance, a residential site in Hangzhou’s Gongshu district sold at a 40.3 percent premium. And on May 23, a plot in Chengdu’s Pidu district went for 59.3 percent above its starting price.
The real estate industry is still going through a deep adjustment and developers are now focusing their limited budgets on prime locations in major cities, said Liu Shui, director of enterprise research at the China Index Academy. This is making competition more fierce. Also, many of the plots that are being put on the market are high-quality, which is driving up prices.
In the first five months, land supply was kept to a minimum across the country, with only a few high-quality plots put up for sale, according to real estate research firm CRIC China. Despite the buzz in big cities, land in lower-tier cities and non-core areas is still struggling to attract interest from developers.
Over 70 percent of the top 100 land purchases in the first five months were by state-owned enterprises and local government backed urban investment firms, the report said. Private developers made up less than 30 percent. Of the top 10 land buyers, only Binjiang Group is privately owned.
Most developers are focusing on core cities like Beijing, Hangzhou, Shanghai and Chengdu, and they are looking for projects with stable returns and fast cash flow, Liu said. But demand for land in smaller third- and fourth-tier cities remains weak.
Property sales among the top 100 developers slumped 17.3 percent in May year on year, a widening of 0.5 percentage point from April, Liu said. This suggests that the real estate market’s future performance still depends on whether more government support is on the way.
Editors: Tang Shihua, Kim Taylor