Recovery in sales fails to ignite demand for primary land sales

YTD figures overview

At the same time, the total land sales consideration decreased by 26.9% to RMB119 billion; this indicated that the average price of land sold increased by 9.3% to RMB4,695 per sqm. New starts increased by 11.9% YoY in the first 3 months, with 387 million sqm currently underway.

The volume of space completed decreased in the first 3 months compared to a year ago, down 10.8% to 185 million sqm. 6,994 million sqm remains under construction, up from 6,466 billion sqm a year before. The volume of space sold decreased to 298 million sqm by March 2019, down from 301 million sqm the previous year, while the average price paid increased by 6.6% YoY to RMB9,065 per sqm. The combined effect of these two indicators means the total consideration paid increased by 5.6% YoY, to RMB2.7 trillion.

Market commentary

Despite an improvement in sales volumes and steady growth in pricing, developers have yet to return to the land auction market in a meaningful manner. Developers continue to face significant debt repayment pressures this year despite signs that monetary policy might be relaxing. At the same time, more opportunities are competing for developers’ attention in the second-hand land market with struggling developers looking to bring on equity partners or dispose of sites outright. Developers and investors with the wherewithal might be wise to bide their time and save their money as pricing for sites might become even more attractive.