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Weak land sales prompt more policy fine-tuning
By Tony Tsang and Jason Ching |
June 6, 2012, Wednesday
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Print Edition
Print Edition
WITH continued tight financing for developers, falling home prices, and rising uncertainties in the global and domestic economies, Chinese developers' appetite for new landbank has remained weak, resulting in continued weak land markets so far this year.
Land sales value, volume, transacted land prices, and degree of participation in land sales have all deteriorated further in 2012. Continuing the weakness in land sales seen in 2011, in the first quarter of 2012 total land sales value in the 300 major cities amounted to about 180 billion yuan (US$28.6 billion), down 57 percent year on year while gross floor area (GFA) sold was down 50 percent year on year. Land sales value in Tier-1 cities was down 68 percent year on year, while that for the key Tier-2 cities was down 51 percent year on year.
The average achieved land price for the 300 major cities was about 1,115 yuan per square meter, down 13 percent year on year. The average achieved land price for the Tier-1 cities was down 28 percent year on year, while that for the key Tier-2 cities was down 25 percent year on year.
With continued weakness in land sales and the resulting financial challenges for local governments, we expect more potential fine-tuning of tightening measures by local governments, within the framework of the central government's aim to promote home purchases by end-users. For example, Yangzhou's local government started offering subsidies to end-users.
In addition to the significant declines in land purchases by developers, we have also seen a sharp slowdown in construction starts - growth in new construction starts in the commodity residential market has turned negative in 2012. We expect new supply in the residential segment to decline in 2013, which should provide a constructive pricing and less competitive environment for developers in strong financial positions.
Land sales value, volume, transacted land prices, and degree of participation in land sales have all deteriorated further in 2012. Continuing the weakness in land sales seen in 2011, in the first quarter of 2012 total land sales value in the 300 major cities amounted to about 180 billion yuan (US$28.6 billion), down 57 percent year on year while gross floor area (GFA) sold was down 50 percent year on year. Land sales value in Tier-1 cities was down 68 percent year on year, while that for the key Tier-2 cities was down 51 percent year on year.
The average achieved land price for the 300 major cities was about 1,115 yuan per square meter, down 13 percent year on year. The average achieved land price for the Tier-1 cities was down 28 percent year on year, while that for the key Tier-2 cities was down 25 percent year on year.
With continued weakness in land sales and the resulting financial challenges for local governments, we expect more potential fine-tuning of tightening measures by local governments, within the framework of the central government's aim to promote home purchases by end-users. For example, Yangzhou's local government started offering subsidies to end-users.
In addition to the significant declines in land purchases by developers, we have also seen a sharp slowdown in construction starts - growth in new construction starts in the commodity residential market has turned negative in 2012. We expect new supply in the residential segment to decline in 2013, which should provide a constructive pricing and less competitive environment for developers in strong financial positions.
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