Land Sales in China Are Down, But Mostly Because They Went Up

China’s land sales fell 45 percent last month compared to the same period last year, but they may still be much more than they used to be.

A recent report from real estate website Soufun.com shows just how much the demand for new land has dropped off in the face of the housing slump, with transactions dropping to a total of 1,767 during May, which was 45 percent less than in the same month of 2013.

The revenue from those deals, which in many cases makes up the majority of local government income was down 38 percent compared to last year, bringing in RMB 13.75 billion ($2.2 billion) as detailed in the survey of land auctions in 300 leading Chinese cities.

In the city of Hangzhou, in Zhejiang province – which has been among the hardest hit of China’s major urban centres during the current slowdown – no land was sold at all. Also last month, Shenyang, the capital of northern China’s Liaoning province suffered a near shutdown in land sales early in the month when from among five plots of land put up for auction on a single day, only one received a bid above the floor price.

While land sales can be uneven from month to month, the Soufun data appears to correlate with a report from competitor Centaline last month, which showed that land purchases by China’s 20 largest developers had fallen 78 percent during the first four months of the year.

But 2014 May Still Be An Improvement

While the comparison of 2014’s results to date with 2013 make the situation appear gloomy, that may also be caused by 2013’s extraordinary surge in sales and values.

Land sales in China’s major cities hit record highs in 2013, with the total transaction values for the country’s four top-tier cities exceeding RMB 500 billion ($82 billion) – about 150 percent higher than what was recorded in 2012, according to figures from Centaline property agency.

The country’s ten largest developers, including China Vanke Co Ltd, Poly Real Estate Group Co Ltd and Evergrande Real Estate Group, scooped up RMB 312 billion worth of new land through December 19th last year, a 90 percent increase over all of 2012, according to Centaline data.

So while 2014 may appear to be the worst year ever, it may actually be only the worst year since 2012.