Shanghai Land Sales Drop to Lowest Point in 12 Months as Supply Dwindles

The value of land sold in Shanghai during the month of March dipped to less than RMB 10 billion, the lowest volume since April 2013, as the city appears to be reducing the amount of land made available on the market.

The drop in land made available appears to run counter to recent central government directives to put more supply on the market to help reduce upward pressure on housing prices.

According to figures made available by the local government, a total of 12 land parcels, excluding those designated for public use, have been auctioned so far this month, with total proceeds amounting to RMB 9.84 billion. The city has no further land auctions scheduled for the month.

The figures for March reflect a 12.8 percent drop in revenues compared to February, but a four percent rise compared to the same month last year.

The 12 plots auctioned since February represented 560,000 square metres of land area, which was 23.1 percent less than March 2013, and 20.8 percent less than February. For April, the city government has scheduled auctions for sixteen sites amounting to only 370,000 square metres. If sold at the auction starting prices, the plots would bring in RMB 5.1 billion for the Shanghai government.

Central Government Priorities Local Government Control

Late last month, China’s Ministry of Land and Resources announced that it will prioritise expansion of land available for housing development this year as the Xi administration continues to look for market driven means of controlling home prices.

The ministry made it clear that top priority will be making more land available in the country’s largest cities.

However, while the central government sets policy and targets, the actual sale of land is up to local governments who, because of their dependence on land sales for revenues, may be reluctant to flood the market with an excess of supply. In Shanghai, the government may also face a dwindling supply of available sites for redevelopment as urbanisation continues to spread.