BEIJING Reuters - China's government land sales slumped for a second month as demand from local developers further softened following tighter regulations on fresh borrowing, adding pressure on private authorities dependent on such auctions for income.
In September, the value of land sales nationwide fell 11.15% on year to 570.3 billion yuan $89 billion according to Reuters calculations of the finance ministry data released on Friday. In August, sales sank 17.5%.
On average, land sales account for about a fifth of local government revenues each year. Land sales jumped to 8.4 trillion yuan in 2020 amid frenzied bids by developers. The record sales, the equivalent of Australia's annual gross domestic product, stabilised local economies and bolstered fiscal budgets in a pandemic year.
At the same time, heightened concern over the indebtedness of developers such as China Evergrande Group led Beijing in August last year to introduce the so-called three red lines - financial requirements that developers must meet. Developers who fail to meet the rules will not be able to get new bank loans.
The tighter financing environment has cast a pall over the sector this year, with capital-strapped real estate companies putting a pause on new projects and scaling back on purchases of land from local governments. nL 1 N 2 R 30 BA The credit environment has rapidly declined since June and financing for developers has been particularly difficult, said Lu Wenxi, chief analyst at property agency Centaline.
Even for developers that have managed to sell homes, they have to wait for months before receiving the funds from buyers, because it typically takes three or four months before mortgage loans are disbursed, Lu said.
Revenue from government land sales rose 8.7% to 5.3634 trillion yuan in the first nine months of 2021, data from the finance ministry showed on Friday, slowing from 12.7% growth in January-August.
In the fourth quarter, land revenue will continue to decline, Lu said. Now the downward channel has opened and the market is already in a downward cycle.