In February, total land sales across 300 cities in China decreased by 40 percent from January, and 30 percent year-over-year. Both sales volume and prices fell.
According to Shanghai-based Tospur Real Estate Consulting Co, there were a total of 1,168 land transactions in 300 Chinese cities in February, a decrease of 44 percent from January (2097 transactions) and down 19 percent from February last year (1443 transactions).
Sales volume in February reached 19.85 billion yuan ($2.95 billion). Average price per square meter was 2,320 yuan ($32 per square foot), a 16 percent increase from the previous month and down 7.5 percent year over year.
In first-tier cities, average price per square meter was 11,008 yuan ($152 per square foot), a big increase of 106 percent from January, and 13 percent increase year-over-year.
In second-tier cities, average price per square meter was 2,554 yuan ($35 per square foot), up 1 percent from January, and down 24 percent from last year. In the third and fourth-tier cities, average price per square meter was 1,118 yuan ($15 per square foot), down 2 percent from January, and down 7 percent from last year.
According to Centaline Group’s Real Estate Research Center, in the first two months of this year, land premium rate in the most sought-after cities remained at a low level around 10 percent.
In the beginning of 2019, land transactions in many cities are still in the adjustment stage, chief analyst of Centaline Group’s Real Estate division Zhang Dawei told Chinese state-media Securities Daily. Moreover, there is strict regulations for trust funds, making it very difficult to get financing for real estate investments. Real estate companies are therefore more cautious when considering land at expensive locations.
An executive at a real estate company revealed that 2019 will be a peak year for bond maturities at real estate companies. Some companies have already mortgaged a large proportion of their equity shares to get financing. So people inside the real estate industry are not surprised at all when this year’s purchase activities are greatly reduced.
Overseas commentator Wen Xiaogang believes that China’s economic environment is deteriorating. Apart from first-tier cities and some hot second-tier cities, most second, third and fourth-tier cities are experiencing declining population inflows and end of urban revitalization projects. Most real estate companies are not optimistic about future prospects.
“The decrease in land sales revenue directly leads to a decline in local tax revenue. In the midst of declining economic growth, the proposed tax reduction of 2 trillion can hardly be achieved. It is very likely that the local authorities will try to retrieve the loss in tax incomes through other ways,” Wen said.
In addition to the sluggish land market, revenues of real estate companies are also falling.
According to Wind Information, a Shanghai-based service provider of financial data, total sales of 33 listed real estate companies reached 334 billion yuan in January 2019, down 18 percent from January 2018. The total living space of the sales reached 23.32 million square meters, down 26 percent from January 2019.
Among the top four real estate companies, Evergrande, Country Garden, Vanke, and Sunac, sales totaled 149 billion yuan in January, accounting for 44.59 percent of the total sales of the 33 listed real estate companies, according to data from Wind. Compared with January last year, total sales of these four companies dropped 33.38 percent.