* Days of record-beating prices for premium sites drawing to
* Developers reluctant to pay for premium land as concerns
* Country's largest listed developer says strategy is to
"not be land king"
By Clare Jim and Yimou Lee
HONG KONG, March 7 The days of Chinese
developers snatching up premium properties with record-breaking
offers are coming to an end as cooling measures bite and sale
prices are squeezed, ending the reign of a handful of "land
kings" in the world's second-largest economy.
First coined during the stimulus-fuelled 2009 real-estate
boom, the Chinese expression is used to describe developers - at
the time mostly state-owned companies - willing to pay whatever
it took to secure land banks.
A string of records were broken at auctions late last year,
when private-sector real-estate companies increased their
presence in the market.
But while the cost of land in premier markets, or first-tier
cities such as Beijing and Shanghai, soared 135 percent in the
third quarter from a year earlier, property sale prices inched
up just 15 percent, according to BNP Paribas.
The already high costs and the prospect of slowing property
sales mean the days of records being set at land auctions are
coming to a close, analysts say.
Signs of a slowdown, from weaker home price data to
developers cutting prices, have already rattled financial
markets in recent weeks. Real estate investment accounts for 15
percent of China's gross domestic product.
"Developers will be more rational when bidding for land this
year, unlike the huge number of land kings we saw the year
before," said Lin Bo, vice-research director at real estate
information provider CRIC. "Considering the risks and costs,
major developers are not willing to pay for premium land now."
Privately-owned China Vanke, the country's
largest listed developer, said on Thursday that one of its
operating strategies was to not be a land king.
"When there's a lot of people after a piece of land, we'd
rather miss the land than buy wrong," said Tan Huajie, secretary
of the board.
China Vanke has won 13 pieces of "premium land" in the
country since 2008, making it the No 2 "land king" after
state-backed Poly Real Estate Group, according to
Any slump in prices paid at land auctions could also have an
impact on China's indebted local governments, for whom such
sales form a major portion of revenue. An average of 24 percent
of local government revenue came from land sales in 2013,
according to the latest data from the Ministry of Finance.
Chinese data last month showed that sale price rises eased
for the first time in 14 months in January, in a sign that the
government's more than four-year campaign to rein in property
prices to avoid a bubble could finally be starting to bite.
This comes after a string of record-breaking prices being
paid at government land auctions.
In September, Sunac China Holdings beat seven
rivals to win a residential land plot near Beijing's eastern
third ring road for 2.1 billion yuan ($342 million), the ceiling
price set by local authorities.
A day later, Hong Kong-listed Sun Hung Kai Properties
, Asia's most valuable developer, won a commercial plot
in Shanghai for 21.8 billion yuan, a record high in the
In a further sign that the market may be losing steam, some
smaller developers have already said they won't compete for
sites until market conditions improve. Private developers Yuzhou
Properties and CIFI Holdings last month said
land prices have become too expensive.
"When we see two signs emerge - government easing
tightening and lower prices in the land market - then we will
increase our land bank in Hangzhou again," CIFI Chairman Lin
Zhong told a press conference last Wednesday, referring to a
city about an hour from Shanghai.
Among the 10 developers that have won the most premium land
since 2008, six are state-backed companies, according to CRIC.
Topping the list are Poly Real Estate, China Overseas Land
and Greenland Group.
Nearly 20 percent of property sold to land kings during that
period remains unbuilt, while three percent of the deals were
forfeited by developers due to financing issues after they paid
deposits, it said.
With prices in first-tier cities expected to slow to single
digit growth or stay flat this year, and private developers
increasingly entering the market, the days of state-owned
property companies bidding up for premium sites are expected to
draw to a close.
"Fewer SOEs (state-owned enterprises) being land kings is in
line with the central government's decision to let markets play
a decisive role in the economy; they hope to lower the SOE's
contribution to the economy and encourage private investment in
construction," said Frank Chen, executive director of CBRE
($1 = 6.1282 Chinese yuan)
(Editing by Anne Marie Roantree and Raju Gopalakrishnan)