Falling land prices are increasing the pain of China’s property tightening.
- Transaction volume for China’s residential land. Click for larger image.
In recent weeks auctions in Chengdu, Jinan and Nanjing have delivered disappointing results, with no bids at some and only low prices offered by buyers at others, the official Xinhua News Agency reported Monday. (Here in Chinese)
That gels with residential land sales data collected by real estate agency Soufun from local land bureaus. Average price per square meter was 1,384 yuan ($218) in October. That’s way down from a peak of 2,307 yuan in September 2009. Weak transaction volume as developers cut back on purchases suggests prices have further to fall.
That’s bad news for local government, who received almost 40% of their income from land sales in 2010. If prices fall, officials will be forced to sell higher volumes of land to make ends meet.
It’s also bad news for developers, many of whom are sitting on large volumes of undeveloped land whose value may have to be written down. Jinsong Du, property analyst at Credit Suisse, says that China Overseas Land, which made substantial purchases at the top of the market at the end 2009 and beginning 2010, could be particularly at risk.
– Tom Orlik
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