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Gloomy property market sinks land sales

By Wang Fei’er (Global Times)

08:29, May 25, 2012

After three years of growth, revenues from land sales are expected to decline this year, Zhao Song, director of the Department of Land Prices at the Ministry of Land and Resources, said yesterday in a press conference.

A downturn in the country's housing market, combined with several years of runaway spending on land plots, has left developers saddled with huge supplies of now-idle acreage, Wei Xiaohou, a sales manager from Centaline China Real Estate, told the Global Times.

According to figures released by the National Bureau of Statistics (NBS) on May 11, developers saw their revenues from home sales drop by 13.5 percent year-on-year in the first four months. Meanwhile, land sales have fallen 13.7 percent year-on-year in terms of revenue over the same period, NBS data shows.

During April 2011, according to research done by Centaline, it was estimated that developers would need 3.8 years to unload their land supplies. However, if the current market climate persists, it may now takes these firms up to 4.5 years to use up their land supplies, Centaline predicted last month.

Developers are not the only ones who will be affected by a slowdown in land buying. Weak demand from the real estate sector will be a blow to many local governments, who rely on land sales as a major source of revenue, said Zhu Daming, vice chairman of the China Real Estate Chamber of Commerce.

As far as what this might mean for home buyers, Zhu posited that as land purchasing fees usually account for 70 percent of a home's retail price, a slight drop in land fees could greatly reduce housing costs.

However, Nie Riming, a research fellow at the Shanghai Institute of Finance and Law, countered this view and predicts that developers will simply delay new construction for the time being. If home supplies remain low, retail prices may stay close to even, said Nie.

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