China Land Sales Slip 7.7% in 2014 on Housing Slowdown

Land sales in China dropped 7.7 percent during the first half of 2014 as the slowdown in housing sales helped trigger a decrease in the amount of land sold to build new projects.

According to a recent report from the Ministry of Land and Natural Resources, land sales in China’s 70 largest cities came to 76,100 hectares from January to the end of June, which still represented a rise of 28.5 percent compared to the volume of land sold in 2012.

Residential Projects Account for 67 Percent of Land Sales

Despite the housing downturn, sales of land for residential projects amounted to 51,000 hectares during the period, with acquisitions for commercial and industrial land comprising the remaining 23 percent. Sales of land for home developments were down the same 7.7 percent as overall land sales compared to the same period in 2013, however, the amount sold still represented a 26.7 percent increase over the 2012 level.

Sales of residential land were boosted in part this year, however, by sales of land for affordable housing projects, which amounted to 11,000 hectares. Sales of land for commercial projects, excluding the affordable housing portion, were down 7.8 percent.

Land Sales Strongest in First-Tier Cities

Just as China’s home prices have held up best this year in its largest communities, land prices in the country’s four first-tier cities, Shanghai, Beijing, Guangzhou and Shenzhen remained stable compared to the same period in 2013.

Sales in second-tier cities took the biggest hit with the volume of land falling 26.5 percent compared to the first-half of 2013. Third-tier cities also sold less land, with these mid-sized communities auctioning off 13.5 percent less than in the period from January to June 2013.

Overall, land sales were down in 48 of the 70 cities surveyed, with the volume of land increasing in the 22 remaining communities.

Falling Demand for Land Brings Fewer Sales

Figures released this month by the National Bureau of Statistics show that sales of housing in China have slid 9.2 percent from January to June of this year, compared to the same period in 2013.

This downturn in home sales has resulted in many developers being saddled with unusually high inventories of unsold homes, and made them less eager to invest in new developments.

Rather than risk putting land up for auction at lower prices, many local governments this year have been slowing the amount of land they put up for sale, in the hopes that demand may rebound, particularly if the central government allows further relaxation of home purchase restrictions this year.