Weak performance in Shenzhen and Nanjing land markets
On November 25, the third round of land auctions in Shenzhen this year sold a total of 11 residential land, with a total land area of about 38.07 hectares, and a total land price of 36.837 billion yuan.
According to the data of China Real Estate Information Group, in the auction on November 25, the transaction volume of the land provided by the Shenzhen government was only 5% higher than the total price, which was 12% higher than the previous auction in September and 31 in May. % Has dropped.
According to China Real Estate Information Group, the land auction situation in Nanjing is even less optimistic. About 26% of the land parcels were unsold, and the unsold rate was higher than the previous batch of 23% and the previous 2%.
In this land auction, Nanjing City also lowered the threshold for transfer of some plots, allowed developers to jointly bid, and provided more plots in prime locations to attract bidders.
Bloomberg reported on November 26 that in the latest round of land auctions, sales in two major cities in China were weak, indicating that even if local governments relax restrictions, developers with tight funds are still reluctant to bid.
According to statistics from the Zhongzhi Research Institute, as of November 18, 2021, 11 cities have relisted the second batch of more than 30 land parcels in the third batch of centralized land supply.
According to statistics, in the second round of local auctions, the rate of unsold auctions in Changsha, Beijing, Shenyang, Hangzhou, and Guangzhou all reached more than 50%. According to data from the China Index Research Institute, within three months from June 2021, the number of unsold auctions involving residential land in various cities reached 612, including 99 in first- and second-tier cities, 513 in third- and fourth-tier cities, and 7 In August, a total of 317 failed auctions in various tier cities.
Local finances will be further strained
The Bloomberg report pointed out that the poor performance of land auctions in Shenzhen and Nanjing may be a sign for other cities in China. Local governments that have always relied on land transfers as a source of large amounts of income will have even more strained financial conditions.
Under the continuous blow of the CCP’s deleveraging campaign, Chinese real estate developers have become increasingly difficult to raise funds and have to find ways to hoard more cash; coupled with the decline in housing sales and prices, real estate companies have made the situation worse, which further discourages them The idea of buying land.
Xie Yangchun, an analyst at China Real Estate Information Group, said: “Many developers are still very tight on liquidity, so their interest has not yet heated up. In the third round of centralized bidding, the land market in key cities may still lack vitality.”
In February, more than 20 large cities in China limited the number of land auctions this year to three, instead of holding multiple small-scale auctions throughout the year as before to prevent developers from driving up land prices. However, as the problems of the real estate industry escalated in the third quarter, this restriction exacerbated the downturn in the land market.
Bloomberg reported that the vast majority of buyers participating in the Shenzhen land auction are state-owned developers, which also reflects that private real estate companies are still struggling. Official data show that Shenzhen Metro Group, which has entered the real estate industry, has won 5 of the 11 plots of land. Vanke did not participate in the land auction, and Shenzhen Metro is its major shareholder.
Yan Yuejin, research director of the Think Tank Center of E-House Research Institute, said that the cooling of the land auction market is largely related to the various pressures faced by the land transaction market. First, various types of land transactions are subject to more and more constraints; second, real estate companies are generally short of funds, and the return of both financing channels and sales funds is slightly sluggish, suppressing the enthusiasm of real estate companies to participate in land auctions.
Although the third round of centralized land supply is the last land auction this year, and local governments have lowered the land acquisition threshold, all real estate companies still maintain a more cautious attitude. First of all, they must ensure the safety of their own cash flow.
.