China’s Land Sales Slump for 4th Month as Property Woes Intensify

By Reuters
November 19, 2021 Updated: November 19, 2021

BEIJING—The Chinese regime’s revenue from land sales slumped for a fourth month in October compared with year-ago levels, as cash-strapped developers moved cautiously on land buying after tighter regulatory curbs on new borrowing were established.

The value of government land sales in October declined 13.14 percent from a year earlier to $89.90 billion, after suffering a drop of 11.15 percent in September, according to Reuters calculations of data released by the finance ministry on Friday.

Many developers, including China Evergrande Group, have grown desperately short of cash since authorities last year unveiled the “three red lines”—a policy of Chinese leader Xi Jinping—that imposes limits on liabilities-to-assets, net debt-to-equity, and cash-to-short-term borrowing ratios.

Poor demand among developers at urban land auctions risks squeezing regional finances, and pressuring local governments to scramble for other income to fund investment, including the issuance of more bonds that increase their debt obligations, say some analysts.

Not all provinces and regions are equally dependent on land-sale revenue.

“The unevenness in regional growth will persist, with developed provinces continuing to perform better than less-developed ones,” Moody’s said.

China’s government land-sale revenue grew 6.1 percent to $930.29 billion in January-October from a year earlier, data from the finance ministry showed, slowing from the 8.7 percent rise in the first nine months.

In February, the land regulator imposed restrictions on sales, allowing up to three auctions a year in 22 key cities including Beijing, Shanghai, and Shenzhen, with the rules aimed at reining in rising land prices that could otherwise lead to higher home prices.

Private developers have bought at least $22 billion of land in a completed round of auctions held by 22 major cities, down about 75 percent from $86.6 billion in the first round of sales this year in March-June, according to a Reuters analysis of public notices on the sales.

China’s property woes have worsened in recent months, with prices lower in both new and resale homes in October, amid deeper contractions in construction starts and investment by developers, weighing on the overall economic outlook.