| HONG KONG
HONG KONG Aug 5 Chinese property developers
wary of poor sales amid the country's industry downturn are
giving expensive government land auctions the cold shoulder,
with plots in the capital going unsold for the first time since
The poor reception highlights the persistent mismatch in
price expectations between developers and local governments.
Cash-tight developers are seeking lower prices while local
authorities are refusing to budge because land sales account for
the bulk of their revenues.
On Monday, of the four lots sold by the Beijing government,
two went to state-backed Greenland Group at the reserve price.
The rest were sold to local developers at lower-than-expected
Last week, of the five Beijing lots put on auction, two that
had their reserve price set near the city's record high received
no bids, the first time that has happened in more than three
years, according to local media.
China's real estate industry has been correcting since late
last year as the central government take steps to cool the
overheated market. Official data show new home prices fell in
June from May for a second straight month, with analysts
forecasting further declines.
The situation contrasts with that last year when developers
were willing to pay whatever it took to secure land. During the
peak years in 2009 and 2013, such so-called "land kings" grabbed
headlines with their aggressive bids.
Market observers said that as property sales slow and the
credit market tightens, many developers, in particular small and
medium-sized ones, have little cash to buy land especially in
top-tier cities where prices are set with a high premium.
"Are we going to see 'land kings' in the second half?
Unlikely. There will still be transactions, but it will depend
on the location and the reserve price," said Knight Frank's head
of valuation & consultancy, Thomas Lam.
Lam added that large developers would rather invest abroad
as inventories in mainland China are expected to remain high.
Beijing-based Longfor Properties told an earnings
briefing on Monday that it "would rather miss the buying
opportunity than buying wrong", adding that it has slowed land
purchases and new project starts since 2013.
Commenting on land prices, Chief Executive Officer Shao
Mingxiao said: "Supply in many Chinese cities is at a saturation
level, so I don't see property prices will rise significantly...
However, land prices did not fall accordingly. Many local
governments did not change their attitude at all, that's why we
saw the failed auction in Beijing recently."
With land prices set by local governments stuck at lofty
levels, sales have fallen.
Government land sales in value terms slumped 40 percent in
Beijing last month from a year earlier, data by research company
China Real Estate Information Corp (CRIC) shows. Shanghai values
dropped 27 percent.
The total value of land sold by local governments in 100
cities last month fell 51 percent from a year earlier, according
to CRIC, a wholly-owned subsidiary of E-House China.
Supply of residential housing has risen on the other hand.
CRIC data released on Monday showed inventory levels in
Beijing increased 30 percent in July from a year earlier. The
research company said it would take more than 21 months to clean
up the inventory.
Inventories in Shanghai climbed 21 percent, which would
require 12 months to clear, according to CRIC.
The impact of the ongoing property slowdown has also spread
to the services sector, with property-related businesses such as
real estate agencies and residential services getting hit.
A private sector survey showed on Tuesday the growth in
China's services sector slowed sharply in July to its lowest
level in nearly nine years.
(Editing by Ryan Woo)