Beijing Residential Land Auction Fails

In addition to easing buying restrictions on homes in many cities, now analysts are predicting land sale restrictions will ease, due to sales falling by as much as two-thirds in July from year ago figures.

Local government revenue takes a hit as land sales drop

On Tuesday, auctions for two plots of residential land in Beijing closed without any winning bidder as the reserve price was not met. Only four deals for residential land put up for sale in the Chinese capital went through in July.

Land sales are also slowing down in other first-tier cities, including Shanghai and Guangzhou. So far, most of the land in Shanghai has been sold at a premium rate of less than 30% and half of the property sites were sold for their reserve prices.

On a single day in June in Guangzhou, auctions for four pieces of residential land and one piece of industrial land were closed without winning bidders as the reserve prices were not met.

Signs of a slowdown are more obvious in second and third-tier cities.

The failed auction was the first since 2011.

Chinese coverage of the Beijing land sales focused on price: developers do not want to be caught overpaying for land in a cooling market. Beijing has been stepping up the pace of land sales and the reserve price of the recent auctions was simply too high for developers. One developer even called the price "outrageous." A plot in Chaoyang was priced at ￥7.7 billion yuan and even if it went for the minimum, it would have been the most expensive land sale (by total value) in Beijing history. An employee from the related government office said developers are holding their capital more tightly, something the government did not anticipate.

北京准地王定价太离谱把房企吓跑 中粮地王被套牢