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China Land Sales Fall for Second Consecutive Month

Slump will add pressure on local authorities, who depend partly on real estate auctions for income

An apartment compound in China
A slowdown in the property sector has been made worse by Beijing's regulatory crackdowns, says an Oxford Economics research note.


The value of China’s government land sales has fallen for a second consecutive month in the wake of tighter regulations on new borrowing, a report on Friday indicated.

In September, the value of land sales nationwide fell 11.15% year on year to 570.3 billion renminbi ($89 billion), according to calculations by Reuters using Chinese finance ministry data. In August, sales sank 17.5%.

The slump will add pressure on local authorities dependent on land auctions for income. Land sales account for about a fifth of local government revenues each year. 

Total revenue from land sales reached 8.4 trillion yuan in 2020, Reuters said. In June, China limited land auctions in 22 cities to just three days in a year.

In August 2020, heightened concern over the indebtedness of developers such as China Evergrande Group led authorities to introduce new financial requirements for developers. Those who failed to meet the “three red lines” on debt levels were ineligible for new bank loans.

“The credit environment has rapidly declined since June, and financing for developers has been particularly difficult,” Lu Wenxi, chief analyst at property agency Centaline, said.


‘Limited Funding Access’

Rating agency Fitch this week downgraded developers Xinyuan Real Estate and Central China Real Estate (CCRE), citing their “limited funding access” and noting that CCRE suspended new land acquisitions in July. 

“Industry conditions and the funding environment have weakened … following the distress of China Evergrande Group,” Fitch noted.

Revenue from government land sales rose 8.7% to 5.3634 trillion yuan in the first nine months of 2021, data from the finance ministry showed on Friday, slowing from 12.7% growth in January-August.

“In the fourth quarter, land revenue will continue to decline,” Lu added. 

Some analysts said the sharper than expected fall in land sales might prompt the government to relax some of its severe measures.

“We see the government’s stance towards developers softening, but not a massive easing,” said Stephen Cheung, an analyst at Jefferies. “We believe … the rapid cool-down of property and land sales gives room for the government to ease a bit on its harsh resolution.”


• By George Russell.



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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.


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