In Depth: Record Land Prices Return as Developers Bet on Prime Plots

The land auction market in Chengdu, the capital of Sichuan province, has recently experienced a dramatic revival, marked by a series of record-breaking sales. In March, China Merchants Property Development Co. acquired a residential plot in Chengdu’s High-Tech Zone for 31,700 yuan ($4,346) per square meter—an unprecedented 70% premium over the starting price. However, this record was quickly surpassed two weeks later when state-backed C&D Real Estate from Fujian paid 41,200 yuan per square meter in the city’s Jincheng Lake district, more than double the initial price. These events reflect a broader resurgence of fierce bidding for prime urban land across China's major cities, including Beijing, Shanghai, Shenzhen, Hangzhou, and Chengdu, with at least 26 “land king” deals smashing local records in Q1 2025 [para. 1][para. 2][para. 3][para. 4].

This flurry of high-priced deals marks a significant turnaround from the slump caused by developer defaults in 2021. Analysts interpret the surge in land sales as a possible early sign of recovery in China’s property sector, though questions remain about its durability. The hotly contested plots share attributes such as premium locations, low plot ratios, and manageable sizes, making them especially appealing for developers targeting the upgrade market. According to Huatai Securities, these parcels enable faster sales and align with existing market trends [para. 5][para. 6][para. 7].

The resurgence is being driven by a combination of strategic actions from local governments—which are releasing sought-after plots to restore market confidence and shore up revenue—and developers, particularly state-owned enterprises, which are consolidating limited investment on high-quality locations. Optimism about the property market bottoming out, bolstered by recent government stimulus since late 2024, is also fueling the recovery. Nevertheless, the recovery is uneven: while first-tier cities see robust demand, smaller markets struggle with inventory overhang and declining land supply [para. 8][para. 9][para. 10].

Big cities like Hangzhou lead the trend, dramatically increasing the release of prime residential land. In Q1 2025, Hangzhou offered about 760,000 square meters of residential land via eight batches, nearly five times the figure from a year earlier—generating 59.6 billion yuan, a 149% year-on-year increase. This targeted push contrasts with the national trend: across 300 cities, residential land supply fell 14.7% and total land sale revenue dipped 15.9% year-on-year in Q1 2025. Developers are focusing resources on prime city plots to tap pent-up demand, given tight financial constraints and risks [para. 16][para. 17][para. 18][para. 19][para. 20].

Strict investment discipline now shapes developer strategy. Despite aggressive bidding for top sites, cash-strapped developers are cautious, favoring small, high-return parcels and avoiding riskier, capital-intensive projects—as seen in Shenzhen, where an expected 10 billion yuan auction flopped for lack of interest. Average land auction premiums have risen sharply, particularly in first- and strong second-tier cities—but remain minimal elsewhere. Developers see top-tier locations as essential for recouping cash quickly, while “survival” and preserving liquidity remain key priorities [para. 25][para. 26][para. 27][para. 28][para. 29][para. 30][para. 31][para. 32].

Debate continues over the sustainability of this rebound. While some experts see renewed optimism, others note that the broader market’s contraction and policy-driven recovery may be unsustainable without further government action. March saw significant year-on-year house sales increases—over 20% in cities like Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, and Chengdu—but these depended on price cuts. Analysts argue that robust and coordinated policy support is vital to ensure market stability and confidence going forward [para. 33][para. 34][para. 35][para. 36][para. 37][para. 38][para. 39][para. 40].