May Land Sales Plummet; 300 Cities Down Nearly 40%; Some Cities Have No Sales

If land sales continued at the rate seen in May, the annualized sales would be down 60% from the ￥4.1 trillion sold in 2013. First quarter land sales of ￥1 trillion were on pace to match 2013, but those numbers look good due to sales in January and February. A significant portion of many city budgets is funded by land sales and land sale revenue is also used to back some debt. Even if sales bottom out or rebound slightly, the decline is already large enough to constrain budgets in cities that overly rely on land sales. As reported last week, one city already cannot repay a developer for returned land.

The numbers:

Land sales: 1767; decline of 19% mom; 45% yoy
Land premiums: ￥137.5 billion; down 30% mom; 38% yoy
Area transacted: 62.2 million sqm; down 26% mom; 49% yoy
Residential land sales: 414; down 37% mom; 54% yoy
Residential area transacted: 17.7 million sqm; down 42% mom; 56% yoy

Since March, Hangzhou has not sold a single parcel of residential land. Hangzhou plans to sell 12 parcels in June, only one is residential. Authorities are intentionally keeping residential plots off the market in order to ease the inventory burden.

In Wuhan on June 5, 10 parcels were offered and 9 transacted at the low price, with one failing to sell due to no bidders. On May 27, Shenyang offered 3 parcels, but no one signed up for the auction. In May, Shenyang offered 18 parcels and 10 were unsold. Changsha and Foshan also saw land fail to catch a bid.

The phenomena also hit first tier cities. Although they didn't experience failed auctions, Guangzhou and Nanjing saw land sales at the low price. In Shanghai, an auction for two parcels were delayed due to a lack of bidders.

In Jinan, there were no land transactions in May.

5月300城土地出让金骤降近四成 土地流拍频现

Affected the property market turnover decline, the recent and more frequent transfer of land or unsold upset phenomenon. Among them, Jinan, Hangzhou and other places last two months or even zero land deal.

China Index Research Institute's latest report shows that in May a total turnover of 300 cities nationwide land 1767, a decrease of 19% mom, down 45% yoy; land premium of the total 137.5 billion yuan, a decline of 30 percent mom, down 38% yoy. Land transactions and premium declined steeply. The May transaction area of 62.21 million square meters was a decrease of 26% mom, down 49% yoy. Among them, the residential land 414 lots, a decrease of 37% mom, down 54% yoy; area of 17.74 million square meters, a decline of 42% mom, down 56% yoy.

Yesterday (June 8), Shanghai E-House Real Estate Research Yanghongxu vice president told the "Daily Economic News" reporter, said that the land market is really cool, but also during further cooling, the negative impact on land finance "This year the land premium may be lower than last year's local government debt pressure increased, so have the driving force to relax regulation, stimulate the real estate."

Frequent land unsold

Compared with previous years, the land market fiery scene, this transaction was deserted, and even months in some cities were neither a deal. "Fired the first shot of the property market price" of the land market in Hangzhou, from March of this year so far, the main city of Hangzhou, had not yet been assigned a case homestead. June Hangzhou launched 12 land, only a commercial and residential land, and the rest are all commercial land.

Hangzhou local media said authorities want to control the land transfer is pressure for lower property inventory considerations, to sell the land last year, the project will form a supply peak this year.

Hangzhou is not only the land market in the doldrums, other parts of the country have launched a number of land transactions occur sharply, and most land transfer to the reserve price. June 5, Wuhan 10 9 to land there at the opening price, no other land appeared quote last unsold. May 27, Shenyang Land Exchange Center 3 land, because no one signed up for the auction, leading all unsold. May, Shenyang launched 18 plots, of which 10 unsold. Changsha, Foshan also experienced the embarrassment of unsold land,

Downcast land market, not only in the second and third tier cities, a second-tier spared. Among them, Guangzhou, Nanjing and other places even with land transactions, are mostly upset bid. The Shanghai plans to launch two unmanned land auction was postponed due to transfer.

Unsold land market is not only appear in some places even zero turnover. For example, in May of Jinan land market is quite deserted, reproduce sell turnover "double hung Zero" situation.

Cooling land market, bringing the land premium atrophy. E-House Real Estate Institute of the latest data show that 10 cities in May typical land transfer revenue 57.8 billion yuan, a decline of 20.3%, down 24.6%, which is the index to fall slightly wounded fell 20 range.

Land becomes difficult to finance short-term

In addition to the land premium to decline, real estate-related tax revenues also appeared sharply. April public finance balance of payments data released by the Ministry of Finance, real estate sales tax dropped 10.2 billion yuan more than the ring. Local tax revenue, the land premium "double down" real estate drag on the local revenue has become an indisputable fact.

With policy advice Research Department released "45 property purchase urban land financial dependence analysis report "shows, Hangzhou, Foshan, Nanjing, Changsha four municipal finance extent of land rely more than 100%, Foshan reached 147.5%, Ningbo land finance dependence was 85.1%.

Research Director Zhang Hongwei same policy advisory body that, for the city is not good in terms of fundamentals, local government finances is dependent on the extent of land is more prominent, such as Hangzhou, Ningbo, Wenzhou. However, he believes that the possibility of Chinese local government debt default is unlikely, while China and the U.S. federal system different; other local governments to ease the debt burden by borrowing new subordinated old.

Cooling land market also led to discussion of community land finances. Last year the country's total land revenue amounted to 4.1 trillion yuan in the first quarter of land revenue reached 1.08 trillion yuan, compared with 1.95 trillion yuan of local fiscal revenue. Land revenue and local public revenue ratio of 1:1.8, local governments dependent on land and not reduced.


Finance Research Institute of the Central University of Finance Wang Jun Yong said, "when the slowdown in economic growth, higher local government reliance on land transfer local government wants to get rid of dependence on" land finance ", it should be a process. "

Professor of Huazhong University of Science and Technology of China Rural Governance Research Center Xuefeng told the "Daily Economic News" reporter, said the land as the basis for urban infrastructure finance, the city is expanding further support an important guarantee, if there is no local government land revenue, urban infrastructure can not keep up.

Zhang Hongwei believes that the land premium decrease is not a bad thing, the local government can promote industrial restructuring, "If the land market is not good, urban construction, how to do, how to do debt, can not simply rely on the local real estate market, the needs of emerging strategic industries, more carry out structural adjustments to promote urban transformation. "