Housing Slump Brings Land Sales Down 20 Percent in Q3

China’s ongoing decline in housing demand is continuing to hurt land sales, as the country’s property developers have begun shying away from big site acquisitions. The trend towards caution in land buys is a dramatic reversal from last year’s record prices for new plots.

According to a new report issued by China’s Ministry of Land and Resources, land prices paid at government auctions still rose in the third quarter of 2014 compared to the previous three months, but by only 0.78 percent. The quarter to quarter growth rate is down by 0.58 of a percentage point compared to the growth rate in the second quarter, according to the Ministry’s index, which measures land prices in 105 cities across China.

Biggest Slowdown Comes in Residential Land

While prices at auctions of residential land rose seven percent compared to the same quarter last year, that growth rate was a major drop off from the nine percent climb recorded during the second quarter.

As China’s housing prices surged in 2013, major cities such as Shanghai and Beijing recorded record prices for land, as developers competed against each other for prized plots. This quarter’s slowdown in residential land sales price growth is the first slackening in the Ministry’s index since 2012.

The dropoff in land price growth corresponds with the housing downturn with government figures released last month that indicated China’s average home prices had fallen for the last four months consecutively. In all, China’s National Bureau of Statistics estimates that average home prices have fallen 11 percent so far this year.

Land Sales Down 20 Percent Nationwide

While the amount of land sold basically held steady in the country’s largest metropolises, in smaller cities there was a pronounced drop in the quantity of land sold. Land sales volumes were down 26.5 percent compared to the third quarter of last year, and off by 13.5 percent in the third tier cities.

Across the 70 cities surveyed, land sales amounted to 26,600 hectares last quarter, down 20.7 percent compared to last year. The drop in land sales is likely to put more pressure on China’s heavily indebted local governments, which depend largely on land sales for their revenues.