Latest from Caixin Weekly | Intensifying Market Buzz and Shaping Expectations: Record-High Land Prices Emerge Frequently in Core Cities (AI Translation)

最新财新周刊｜强化热度营造预期 核心城市频出“地王”

Summary:

[para. 1] In early 2025, Chengdu witnessed record-breaking land sales, with key residential plots selling at premiums exceeding 100%, signaling a significant boom in the city’s land market. China Merchants Shekou and Jianfa Real Estate emerged as top buyers, setting new per-square-meter price benchmarks. Similar high-priced land transactions—dubbed “land king” deals—occurred in other major cities, notably Beijing, Shanghai, Shenzhen, Hangzhou, and Chengdu, where at least 26 such deals were registered in the first quarter of 2025, indicating a revaluation of urban assets and improved market sentiment.

[para. 2][para. 3] The resurgence in land auctions has been driven by both local governments, eager to stabilize property markets and spur sales, and developers, seeking profitable projects in core city districts. These highly sought-after parcels are generally compact, improvement-oriented, and are more swiftly sold upon completion. Following government interventions and supportive policies—especially after the Central Political Bureau’s call for stabilization in late 2024—there have been signs of recovery in property markets, especially in first- and second-tier cities, whereas third- and fourth-tier cities continue to face inventory and demand challenges.

[para. 4][para. 5] A multi-phase, quality-focused strategy in land supply is expected to support further premium land sales and boost confidence. State-owned and central enterprises are leading investments, especially in prime areas, but a full recovery depends on revived private sector involvement and a sustained rebound in property sales. Stabilizing the property market is seen as vital for broader economic health, especially with ongoing international trade tensions requiring China to rely more on domestic demand.

[para. 6][para. 7] Government policy has decisively shifted towards supporting real estate, highlighted by initiatives to stimulate housing demand, urban renewal projects, and targeted fiscal support. New land supply announcements, particularly in Hangzhou, reflect this push: Hangzhou alone listed 20 land plots for sale in Q1 2025 (760,600 sqm), a major acceleration from the previous year. Nonetheless, nationwide land supply contracted 14.7% year-on-year in early 2025, with larger cuts in smaller cities.

[para. 8][para. 9][para. 10] The revival is most pronounced in core cities—Shanghai increased premium parcel offerings, and Hangzhou rapidly brought multiple plots to market, leading nationwide in total land sale fees (59.6 billion yuan in Q1 2025, up 149% y-o-y). In contrast, national land sales revenue continues to contract—down 15.9% y-o-y in Q1—posing risks to local government finance and new housing supply.

[para. 11][para. 12][para. 13] Fierce competition in core city land auctions has driven prices higher, with average auction premiums in first- and strong second-tier cities exceeding 16%. Developers, especially state-owned ones, now carefully target only high-quality plots in prime locations, favoring smaller parcels and aiming for rapid turnover and cash flow security, a sharp shift from riskier, broad-based investments of previous years.

[para. 14][para. 15] The “land king” phenomenon last peaked in 2021 during a period of restricted, centralized land sales, leading to overpaying and losses when profit margins were squeezed by government price caps. Now, as price controls ease, profit margins are expected to normalize, though risks remain if the upward trend prompts overly aggressive bidding.

[para. 16][para. 17][para. 18] Whether the current market boom will last depends on a genuine recovery in home sales. March 2025 saw marked transaction increases in top-tier cities (e.g., Beijing’s new homes up 46% y-o-y), but overall market uncertainty persists, as do structural risks. The government is responding with policies targeting the delivery of pre-sold homes, conversion of idle stock, and new funding lines to support acquisition of unsold homes and idle land. Calls for a national real estate stabilization fund are growing, with expectations of further policy easing in major cities to sustain recovery and avoid repeating boom-bust cycles. ■

["Each bracketed indicator refers to summarized source paragraphs."]