SOEs Dominate Land Auctions, With Private Property Developers Gone

原標題：SOEs Dominate Land Auctions, With Private Property Developers Gone

BEIJING, October 26 (TMTPost) -- The third batch of land parcels in Shanghai was completely auctioned over nearly half a month by Wednesday, with all 17 parcels going to central government-owned enterprises and state-owned enterprises (SOEs).

The third batch of land in Shanghai was auctioned in two rounds, with first on October 12 and the second on Wednesday and Thursday, with an average premium rate of 6.67% and 2.34% respectively. The total transaction value for the 17 land parcels was 67.57 billion yuan ($9.23 billion) and all of them were acquired by central government-owned enterprises, including China Overseas Land & Investment Ltd., CR Land, and Poly Developments And Holdings Group Co., Ltd.

One of the parcels, located in the Longhua Street of Xuhui District, Shanghai, was sold for a staggering 24.02 billion yuan ($3.28 billion), making it the "land king" of the year in Shanghai. It was won by a consortium consisting of China Overseas Land & Investment Ltd. and a subsidiary of the State-owned Assets Supervision and Administration Commission (SASAC) of People's Government of Xuhui District, Shanghai. The high price of this land parcel was not due to bids from real estate companies, but rather its high starting price,which is also its transaction price, because of its large area and diverse land use, including condominiums, rental apartments, research and design offices, commercial units and general offices.

Six out of all the 17 land parcels in the auction were sold at the minimum price, a once unusual phenomenon but common now in first-tier cities and even more common in other cities of China. A failure to auction a parcel across the country is not rare at all. According to data from the market research firm CRIC, the national land market had an average auction failure rate of 11% in 2020. However, it rose to 15.5% in the first nine months of this year. In the past four months, the average auction failure rate even hit 20%.

According to statistics from the China Index Academy, Shanghai secured the total transaction value of 183.82 billion yuan in its three rounds of residential land (at the city level) auction in 2023, making it the top city in the country in terms of transaction scale.

Land markets in various regions varied significantly. According to September data from CRIC, the nationwide land market saw an average failure rate of land auctions at 19.6%. The average premium rate for land auctions in key cities was 4.5%, but in second and third-tier cities, including Wuhan, Changsha, and Qingdao, land parcels were almost all sold at the starting price.

Overall, the land markets in most cities across the country see rises in the failure rate of land auctions, falls in premium rates, and the dominance of central government-owned enterprises and SOEs. According to CRIC's data, the average price premium for land in key cities has been decreasing this year, dropping from 7.3% in March to 4.5% in September.

Since the second half of 2021, the ability and willingness of private real estate developers to acquire land has continued to decline. Various levels of land markets are now propped up by government urban investment platforms and state-owned enterprises. Private real estate

developers used to be the backbone of land markets in various regions, with the annual land acquisition investments of the top 100 reaching around 2 trillion yuan before 2021. However, the figure dropped to 1.7 trillion yuan in 2021 and less than 250 billion yuan in 2022, representing an 88% decrease year-on-year. This trend has continued into 2023, with private real estate developers in the top 100 only investing less than 60 billion yuan in land acquisition in the first half of the year, a further 28% decrease compared to the same period last year.

Since the third quarter of last year, some private real estate developers have been plagued by cash shortages and struggled for refinancing. With sluggish sales in the market, the prospects for most private real estate developers are not optimistic, and they lack the capacity to invest further. In markets like Shanghai, where the threshold for land acquisition is high, the ability of private real estate developers to acquire land is particularly limited. According to Shanghai's land auction rules, developers eligible for participating in an auction must provide a deposit and a high proportion of bank-regulated funds, requiring developers to have their own funds

amounting to 100% to 110% of the starting price of the land parcel.　　

Apart from high land acquisition thresholds and inadequate funds, the disappearance of private real estate developers from the land auction market in Shanghai is also attributed to the fact that despite policies introduced in first-tier cities to boost the real estate market, the positive effects of these policies have been diminishing over the past month, and market sentiment and expectations have not reversed, according to market institution Topsur.

This year, the sales of condominiums in China has continued to decline, and the transactions in land market has also decreased compared to the same period last year, putting significant pressure on local governments. According to data released by the Ministry of Finance on Tuesday, impacted by the significant decrease in revenue from the sale of state-owned land use rights, budgetary revenues from government-managed funds have also seen a substantial decline. From January to September, budgetary revenues from government-managed funds at the provincial level amounted to 3563.5 billion yuan, a year-on-year decrease of 16.3%. Among this, revenue from the sale of state-owned land use rights was 3087.5 billion yuan, representing a year-on-year decline of 19.8%.

標題：SOEs Dominate Land Auctions, With Private Property Developers Gone

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