Major Chinese Cities Cut Land Auction Prices by ~20%

Major Chinese cities slashed land auction prices by up to 20% in an effort to attract bids from cash-strapped developers amid the gloom in the property sector. Almost a third of the 700 plots across China that went on sale since September had to be withdrawn after they failed to generate sufficient interest from developers. After the central bank placed tight caps on loans to control speculative bubbles in the residential real estate sector, many cash-strapped developers such as China Evergrande and Kaisa Group were driven to the sidelines, resulting in stalled land sales. Land sales form a major source of revenue for local authorities. A week ago, FT reported that state-owned developers bought ~75% of residential land auctions in the last three months across 22 big cities, thereby helping local governments.

Cities like Hangzhou, Shenzhen and Guangzhou have either cut land prices in the third and final round of sale or relaxed the rules for developers buying land. Yan Yuejin, director of the E-house China Research and Development Institution noted “Such favourable policies are signals of a relaxation in the real estate environment and underscore that the central government does not mean to kill the sector, but to regulate it better”.

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