China Land Sales Revenue Fell 21% in 2015

Sales of land in China fell to RMB 3.37 trillion in 2015, down by 21.6 percent compared to 2014, as local governments cut back on new site auctions, according to official figures released by the Ministry of Finance.

The newfound reluctance to put new plots up for bid came as falling home prices in most Chinese cities made developers cautious about taking on new projects and growth in property investment slowed to a seven-year low of one percent in 2015.

Any sustained reduction in land sales revenues will put pressure on heavily indebted local governments, who are estimated to rely on land sales for an average of more than 40 percent of total municipal revenues, according to data from Shanghai Wind Information.

Eastern China Led the Way Down

The sharpest drop in land sales revenue came in eastern China, which includes the commercial centre Shanghai, where property auctions fell by 23.6 percent compared to 2014. While demand for new housing continues to grow in Shanghai, the city of more than 20 million people suffers from a lack of new available sites. In the city of Ningbo in Zhejiang province, land sales revenues fell by more than 50 percent.

Shenzhen, where new home prices have risen 57 percent in the past 12 months saw the strongest increase in land sales, with revenues rising by 36.9 percent during the year. Dalian, in China’s struggling northeast saw the sharpest drop in land sales revenues, with income from site auctions falling by 56.5 percent.

Although China’s home prices have been rising in recent months, and with them the fortunes of the country’s real estate developers, 2015 was a challenging year for the sector, which is estimated to account for more than 15 percent of the country’s total GDP.

30 of China’s 59 domestically listed property developers saw net profits decline in 2015, with eight of those companies suffering financial losses.

In terms of volume the supply of land sold in 2015 dropped by 18.6 percent compared to 2014. The average price per square metre of land sold climbed to an average of RMB 5,484 ($848) per square metre, up by 3.92 percent compared to 2014.