Struggling Chinese property developers have a reduced appetite for land in major cities, except in Shanghai where sales rebounded after its brief exit from a coronavirus-induced lockdown.
Only nine of the 20 cities that concluded their first round of land sales in 2022 saw higher average prices, compared to 11 cities that saw price gains in the final round of 2021 auctions.
Shanghai rebounded after emerging from a two-month lockdown, with all 36 lots on sale sold in China’s biggest city by economic output. Prices averaged 2.32 billion yuan ($348 million) per lot, up 33% from the last sale in 2021.
In 2021, regulators began limiting land sales in 22 major cities to three rounds a year to control prices, while borrowing restrictions squeezed developers already in debt, weakening their appetite for land from the mid from last year.
Zhengzhou and Shenyang, two provincial capitals hit hard by China’s housing slowdown, have yet to even hold their first round of auctions, reflecting low sales expectations.
Developers are willing to buy land in Shanghai because “there is a large profit margin between the price of land and the sale price of new homes,” said Lu Wenxi, chief analyst at real estate agency Centaline.
Still, public developers led the sale, buying 30 of the lots, with cash-strapped private developers cautious about new land purchases.
To boost sales, Shanghai had eased some restrictions on bids after a temporary suspension of land auctions in late March when a local Covid-19 outbreak began to escalate.
- Reuters, with additional editing by George Russell