June 3, Land sales revenues in 128 Chinese cities dropped 5% year-on-year in the first 5 months of this year to RMB 665.9 billion, the Shanghai Securities Journal reported on Friday, citing data from Shanghai-based investment advisory firm CEBM Group.
Of the total, RMB 519.3 billion came from sales of residential land plots, although that figure was also 14% down from a year earlier, the data showed.
Land sales in Beijing and Shanghai fell the most as the central government’s property curbs had the biggest effect on the nation’s richest cities — total land sales in Beijing and Shanghai in the period declined by 56% and 37%, respectively, while revenues from residential plots sank 84% and 44%, respectively, the data showed.
Industry analysts cited in the report said they believed the fall in revenue from land sales was partly caused by the limited supply of plots in the first 5 months, and that as the second half of the year approaches the supply of land is expected to increase.
“Despite some increases [in the supply of land plots], developers will still be struggling with cash flow problems and therefore land sales will probably stay at a low level throughout the year,” an unnamed analyst was quoted as saying.
Developers aren’t the only ones being affected by China’s painstaking efforts to “bring home prices to a reasonable level”, a vow made by China’s Premier Wen Jiabao in early May. Local governments’ revenues from land sales, which many of them rely on for income, may be affected should land sales continue to fall.
Their finances will come under more pressure now that the Ministry of Finance and the Ministry of Housing and Urban-Rural Development have ordered that at least 10% of the net revenues from selling land plots be channeled into affordable housing construction.
According to a report released by the National Audit Office last year, 22 cities including Shanghai and Beijing would have failed to meet that target in the years 2007-2009.
China would need at least RMB 1.3 trillion-RMB 1.4 trillion to achieve its goal of building 10 million affordable housing units by the end of this year; about RMB 500 billion will be provided by the central government and its local branches via various channels, according to the housing ministry’s estimates.
In Beijing, 79 plots were sold for a combined RMB 26.47 billion in the first 5 months, less than half of the amount collected for the same period last year, China Business News reported on Friday without providing the source of the data.
Beijing New Home Sales Stall
A total of 29 residential property projects were launched in Beijing last month, and by the end of May 9,443 units covering a combined 968,000 square meters had been sold, up 60.2% and 74.2% month-on-month, according to data from Beijing-based Yahao Real Estate Selling & Consulting Solution Agency.
New home prices averaged RMB 22,278 per square meter in Beijing last month, down 3.9% from April, the data showed.
By May 31, only 31.1% of units at the 29 projects had been sold, and units from more than 15 of the projects accounted for less than a quarter of the total units sold, according to the data.
While the residential property market is struggling in the face of the government’s curbs, Beijing’s commercial property sector is rapidly advancing — transaction volumes reached a 2-year high of 3,347 units in May, up 150% from the same month last year, the China Securities News reported, citing data from the local property transaction portal.