China's land sales reported a slight recovery last month following the introduction of easing measures across the country.
Beijing, which finished its first round of land sales on February 16 and 17, fetched 48 billion yuan (US$7.6 billion), or 73 per cent more than the third round last year. Land in China can only be sold three times a year, according to a centralised scheme introduced by the central government in early 2021.
"We saw fewer plots withdrawn and an increase in premiums, which suggests that the marketing is warming up again slightly," said Shen Meng, a property analyst with Southwest Securities.
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The slight improvement came after the central as well as local governments unveiled easing measures to boost real estate sector sentiment. These measures were prompted by the withdrawal from sale of about a third of the 700 parcels of land put up for tender across China since September last year.
China's cash-strapped developers, hit by curbs introduced to keep their borrowing under check, had shown little interest in spending big on land. Some major Chinese property developers have failed to pay their debts since late last year, which prompted the tightening measures.
To stop the cracks in the sector from widening, China cut the mortgage rate and took the loans developers used for mergers and acquisitions out of the calculation of their debt. Local authorities too eased policies to help the real estate industry recover.
Earlier in February, Heze became the first city in China's northern Shandong province to introduce easing measures, with four major banks lowering the minimum deposits for home purchases to 20 per cent from 30 per cent. Within the next two weeks, eight more cities including Nantong in the eastern Jiangsu province and Foshan, part of the Greater Bay Area, lowered their down payment requirements.
"The local governments likely faced mounting pressure to stabilise the property market," said Zhiwei Zhang, chief economist at Pinpoint Asset Management, pointing to a 72 per cent drop in land-sale proceeds in January. Land sales are a major source of receipts for local authorities. "This is important, as land sales accounted for around 43 per cent of local government revenue in 2021," he said.
"The easing gives developers more room to spend on land. Thus, we will see a more brisk land market in the coming months," said Yan Yuejin, director of Shanghai-based E-house Research Institute.
Of the 18 plots put up for sale in Beijing last month, 17 were snapped by different developers. The premium on reserve prices on average stood at 4.5 per cent. In comparison, during the last land auction in Beijing, only 11 plots were sold and the premium stood at only 1 per cent.
In Shanghai, the local government revealed last week that it will offer 40 plots for sale in its first round of land sales later this month. In the last round last year, the city offered only 27 plots.
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