Business / Industries

Developers 'lose the plot' as property sales plunge

By Zheng Yangpeng (China Daily) Updated: 2014-08-20 07:18

The chill in the property market has cooled developers' interest in acquiring new sites, pushing local governments' land sale revenue down sharply.

According to brokerage Centaline Property Agency Ltd's market research, 20 major developers have spent 182.5 billion yuan ($29.7 billion) so far this year to purchase sites, down 38 percent year-on-year.

"Worsening property sales have undercut the willingness of developers to buy land. Their focus now is on raising cash from the sales of what they've already built. Few are in the mood to buy more land," said Zhang Dawei, director of the market research team.

Even in the hottest land markets, such as Beijing, where any available plot has always been snapped up by an eager developer, the market significantly cooled. When land was auctioned in late July, two sites did not draw any bids. The last time that happened was three years ago.

In July, aggregate land sales revenue for 300 Chinese cities was 147.5 billion yuan, down 49 percent from a year earlier, according to the China Index Academy, a property research organization owned by SouFun Holdings Ltd.

Land sales in the four largest cities - Beijing, Shanghai, Guangzhou and Shenzhen - sank by a staggering 70 percent to 21.7 billion yuan.

The squeeze on land revenue has prompted dozens of cities to ease home purchase curbs imposed three years ago. Out of 46 cities that had such restrictions, 36 have dropped or eased them in hopes of propping up the market.

Those hopes were dashed, however, as the move had a very limited effect in sparking housing sales. In July, 64 cities recorded month-on-month price declines for new homes among the 70 cities tracked by the National Bureau of Statistics, up from 55 in June.

"The downturn means that the scale of land sales for the remainder of this year could continue to contract. Developers have pushed the 'conservative' button," Zhang said.

Zhao Qiang, chief analyst for the real estate sector at China Galaxy Securities Co Ltd, said that because banks' funding costs have risen, few lenders are eager to make mortgage loans at rates of 6 to 7 percent.

Developers 'lose the plot' as property sales plunge

Developers 'lose the plot' as property sales plunge

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