June 4, 2013
Translated by Chi Yi

China's land market went through the roof in May, with competition among developers driving up the price paid to lease parcels of land in various cities.

According to a report published by E-house China R&D Institute (上海易居房地产研究院), an independent reseasrch firm based in Shanghai, the amount of land leased by the government to developers in 10 typical cities shot up by over 40 percent in May when compared to both the previous month and May 2012.
The revenue raised from these land transfer deals also shot up by more than 60 percent month-on-month and over 390 percent year-on-year to almost 67 billion yuan, the highest monthly level since 2008.

In May, developers paid an average price of 3,015 yuan per square meter for land in these ten typical cities, more than 3 times the average amount paid in May 2012.

In Beijing, revenue from land leases over the first five months of this year exceeded 60 billion yuan, almost equal to the total amount of revenue raised from land deals in 2012.

The land markets in the first-tier cities of Beijing, Shanghai, Shenzhen and Guangzhou have been especially active, with revenue from land leases made in these four cities over the first five months of this year exceeding 141 billion yuan. This more than four times the 31 billion that had been raised in the first five months of 2012.

Zhu Guang, a researcher with E-house China R&D Institute, told a reporter with Economic Information Daily that the pick up in land sales is mainly due to the fact that cities have set their land supply plans for the year and have already sent these plans to the central Ministry of Land and Resources for approval and that local government had now begun to actively promote land sales. Zhu also mentioned that developers were also becoming more willing to spend.

"Some prime parcels of land are now available which has intensified competition. I predict that the land market will remain this active towards the end of the second quarter."

At the same time, property prices across the country have also been increasing. Data from China Index Academy (中国指数研究院), a Beijing-based real estate research institute, revealed that the average price of newly-built residential properties in 100 Chinese cities was 10,180 yuan per square meter in May, up 0.81 percent from April. The average price of new residential properties had increased on a monthly basis for the past 12 consecutive months.

Average prices are up by nearly 7 percent when compared to May 2012, the sixth consecutive month that prices have gone up on a year-on-year basis.

An analyst from China Index Academy told the Beijing News that the implementation of the latest round of property purchase restrictions had not been as strict as many expected and that in most cities the policies are pretty much the same as they were before the new policy was announced. The analyst also predicted that China's property prices would continue to rise due to increases in the price of land price and insufficient supply in major urban centers.

Local governments in China can raise revenue by selling long-term land leases on urban land. These land transfer fees are a principal source of funds for local governments though revenue declined dramatically after property purchase restrictions and other policy measures were introduced in late 2010 with the aim of putting a lid on rapidly rising property prices.

Links and Sources
Economic Information Daily:十城市5月卖地收入暴增近4倍 创08年以来新高
The Beijing News:5月百城房价指数连续12月上涨
Economic Observer Online:Land Transfer Fees Shrink 67% in Jan
Economic Observer Online:Beijing’s Land Market Cools
Economic Observer Online:Spending Proceeds of Land Sales