Chinese cities sell more land to replenish coffers

BEIJING -- Chinese cities have moved to boost local land markets, as a persistent economic downturn has undermined the fiscal incomes of local governments, analysts said Wednesday.

On Monday, Hangzhou, capital of east China's Zhejiang province, auctioned seven downtown land plots at their initial bidding prices after revenues from land sales in its main city areas dropped to a five-year low in the January-July period.

In Wenzhou, another property hot spot in Zhejiang, a record number of 52 land spots were put up for sale at a local promotional fair on Saturday.

The concentrated sales reflect the intent of local governments, which depend heavily on land sales for fiscal revenues, to boost sales by offering low prices amid a cooling land market, said Cao Xudong, a researcher with the China Index Academy's Hangzhou institute.

The property market has cooled significantly since the central government started to introduce measures to cap runaway prices in 2010. But home prices have picked up in recent months following the central bank's move to slash interest rates to buoy the slowing economy.

With a warming market, property developers have regained confidence to buy in the land market, Cao said, adding that local governments are more willing to sell, as there are more buyers than in the first half.

In Beijing, 11 plots of land were put on the market this week. Yongxiang, general manager at Dayue Consulting, estimated that the municipal government will pocket at least 7 billion yuan ($1.11 billion) from the auction, which will be held next month.

The market is expected to see a transaction peak across the country in September. Data from the Ministry of Land Resources showed that the government sold just 47,200 hectares of land in the first half, accounting for 29.6 percent of its full-year land supply target for 2012.

However, foreign investors have started to leave the country since the global economic downturn, and domestic real estate developers are strapped for cash due to government controls, which may increase competition between those wishing to purchase land.

Zhang Dawei, chief market analyst at Zhongyuan Real Estate, said the large-scale property sales in Beijing are expected to attract limited amounts of funds, as property developers have only small amounts of capital at their disposal.

Official data showed that foreign investment in China's property development has decreased on a monthly basis since March. The sector saw foreign capital drop 22.4 percent from a year earlier in March, with the rate expanding to 54.3 percent in July.