China’s embattled property developers have a reduced appetite for land in major cities, except in Shanghai where sales have rebounded after its brief exit from a coronavirus-induced lockdown.
Only nine of 20 cities that concluded their first round of 2022 land sales saw higher average prices, compared with 11 cities that saw price gains in the last round of the 2021 auctions.
Shanghai rebounded after exiting a two-month lockdown, with all of the 36 lots on sale sold in China’s biggest city by economic output. Prices averaged 2.32 billion yuan ($348 million) per lot, up 33% from the last sale in 2021.
Regulators in 2021 started limiting land sales in 22 large cities to three rounds a year to control prices, while curbs on borrowing squeezed already indebted developers, weakening their appetite for land since the middle of last year.
Zhengzhou and Shenyang, two provincial capital cities hard hit by China’s property downturn, have yet to hold even their first-round auctions, reflecting weak expectations for sales.
Developers are willing to purchase land in Shanghai as “there is a large profit margin between the land price and the selling price of new homes”, said Lu Wenxi, chief analyst at property agency Centaline.
Still, state-owned developers led the sale, buying 30 of the lots, with cash-strapped private developers cautious on new land purchases.
To spur sales, Shanghai had relaxed some curbs on bids after a temporary suspension of land auctions in late March when a local Covid-19 outbreak started to escalate.
- Reuters, with additional editing by George Russell
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