China’s 10 biggest developers poured more than half of their RMB 63.9 billion (US$10.5 billion) in land purchases this year into four of the country’s biggest cities as competition for prime locations increases.
A recent report in the Securities Daily found that land purchases in Beijing, Shanghai, Guangzhou and Hangzhou by the largest property developers amounted to RMB 36.9 billion (US$6.1 billion) – more than 57 percent of their total purchases, since January 1st.
China’s Housing Market Splits
While home price increases have reached double-digits in China’s major cities in recent months, second and third-tier cities showed lower rates of increase.
Despite more relaxed requirements for housing purchases in second and third tier cities, many analysts see the potential for oversupply, and developers have become understandably less eager to buy land in these emerging areas.
“Many cities, particularly second- and third-tier cities, have serious problems of home oversupply,” said Huang Yu, of the China Index Academy, private real estate research institute and data provider in China.
Developers Paying Record Prices in Major Cities
As caution has increased in second and third tier cities, more attention has been focused on the largest metro areas as competition to stay in the game is driving land sales interest to record levels.
According to the Daily, Sino-Ocean Land spent RMB 7.3 billion (US$1.2 billion) to buy land in Beijing earlier this month, while Franshion Properties bought prime residential land in Shanghai for RMB 10.1 billion (US$1.7 billion).
Market intelligence from real estate data provider CRIC found that in just the first 23 days of this year, Beijing raked in land sale revenue of RMB 40.3 billion.