Slowing investment is making excitement at China’s land auctions seem like a thing of the past
Investment by China’s real estate developers continued to slow during June, as the industry is squeezed between rapidly growing inventory and dropping demand, according to government statistics released today.
And these difficulties facing property firms are rapidly spreading to the nation’s local governments, as a separate official report showed that urban land price growth slowed for the second quarter in a row.
According to data published today by the National Bureau of Statistics, growth in real estate investment in China fell to 14.1 percent for the year to date, compared to the same period of last year. During May, the year to date growth rate had been 14.7 percent, which was already a deceleration on the rate of 16.4 percent recorded from January through the end of April, according to statistics gathered by Mingtiandi.
Total investment in real estate development in the first six months was RMB 4.2 trillion ($677 billion), up from RMB 3.07 trillion (US$494 billion) during the first five months of 2014. In terms of new floor space under construction, there was a 16.4 percent drop during the first six months of 2014, compared to the same period of last year, with just over 801 million square metres of new space getting underway.
Residential Real Estate Dropped the Most
The most significant drop in new investment was in residential real estate, where the volume of floor space being started fell by 19.8 percent and the cash value of new investment fell by 13.7 percent.
In the commercial sector, new investment amounted to RMB 3.11 trillion ($501 million), in the first six months of the year, down 6.7 percent compared to the same period in 2014.
In a sign of growing trouble for developers of strata-title commercial projects, sales of commercial space were down 6.7 percent in terms of value, and 6.0 percent by floor area, while the amount of space available for sale ballooned by 24.5 percent, to 544 million square metres.
Less Real Estate Investment Means Lower Land Prices
On the same day that the Bureau of Statistics released its investment figures, the China Land Surveying and Planning Institute released a report on land sales, showing that price growth for new sites slowed to 1.36 percent during the period from April through June this year, the second straight quarter of falling rates, and average land prices actually fell 0.53 percent compared to the period from January through March.
In the Bureau of Statistics report, the amount of land sold across China was shown to have fallen by 5.8 percent during the first six months of the year, to 148 million square metres.
The Planning Institute’s figures showed that during the second quarter, land sales in China’s first-tier cities accounted for a disproportionate amount (39 percent) of the nationwide total, as demand for land in smaller cities has fallen.
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