China Index Research Institute: The scale of residential land transactions and concessions in 300 cities increased sharply year-on-year in October

The Zhitong Finance App learned that on November 2, the China Index Research Institute published an article stating that due to the acceleration of land supply in some cities in September and the centralized volume of residential land supply, the scale of residential land transactions and concession funds in 300 cities increased sharply year-on-year in October, and the scale of land sales declined significantly in October. According to data from the China Index, the planned construction area of residential land in 300 cities was 108.2 million square meters, up 91.8% year on year; concession funds were 375.6 billion yuan, up 89.0% year on year, but the increase in transaction scale was mainly driven by early supply volume. The popularity of land auctions in third- and fourth-tier cities was still low in October. The average premium rate was only 1.5%, a new monthly low in recent years.

Affected by the volume of supply in some cities in September, the scale of residential land transactions and concessions in 300 cities increased sharply year-on-year in October, but the premium rate fell to a new low in recent years

Figure: Monthly trend of residential land launches, transaction planning, construction, and concession funds in 300 cities

Figure: Monthly trend of average premium rates for residential land in 300 cities

Data source: Middle Index Data CREIS

The scale of land transactions increased dramatically in October, mainly driven by early supply volume, and the transaction structure was dominated by third- and fourth-tier cities. According to China Index monitoring, in October, the planned construction area of residential land transactions in 300 cities was 108.2 million square meters, an increase of 91.8% over the previous year; concessions amounted to 375.6 billion yuan, an increase of 89.0% over the previous year. Transaction volume was mainly driven by the supply side. Under the influence of implementation points related to inventory removal, some cities accelerated the pace of land supply in September, and residential land launch plans in 300 cities increased 106% year-on-year. Among them, second-tier cities grew 66.2%, third- and fourth-tier cities grew 120%, and first-tier cities fell 6.1%. The centralized release of early supply boosted the scale of residential land transactions and concessions in October. Looking at the transaction structure, residential land transactions in the 300 cities in October were mainly in third- and fourth-tier cities, accounting for 86% and 73% of the planned construction area and concessions, respectively.

It should be pointed out that the increase in the scale of transactions does not mean that the popularity of local auctions has rebounded. In October, the average premium rate for residential land in 300 cities was only 1.5%, falling to a new monthly low in recent years. The market is still dominated by reserve price transactions, and the overall investment attitude of housing enterprises is biased. Looking at subsequent trends, the planned construction area of residential land launched in the 300 cities in October was 43.06 million square meters, a year-on-year decrease of 46%. The short-term land supply side contraction trend has not changed.

Investment by housing enterprises has further converged towards “certainty”, and most high-premium plots are “small but beautiful”

Table: High residential land premium situation in core Tier 1 and 2 cities in October (premium rate ≥ 10%)

Data source: Middle Index Data CREIS

Looking at key cities, the popularity of local auctions in core cities declined markedly in October compared to September, and reserve price transactions are still the mainstream of the market. According to monitoring by the China Index, premium land mainly shows the following characteristics:

First, there are still case premiums in core scarce areas, but the popularity range is narrower and premiums are more convergent. Improvement sectors such as Hangzhou Xiaoshan, Guangzhou Huangpu Science City, Zhengzhou Zhongyuan Ersha, and Wuhan Optics Valley Central City received certain bids. Among them, Hangzhou Hangzheng Storage [2026] Land No. 78 was purchased by Binjiang Group at a total price of 2,969 billion yuan. The transaction floor price was 5,3472 yuan/㎡, and the premium rate reached 48.53%. This was the first residential land sold in the urban area after the implementation of the Hangzhou 8.28 New Policy Rules.

Second, land plots with low density, small size, and low total price continue to be the dominant premium. In October, the area ratio of high-premium plots was mostly below 1.5. The planned construction area was generally less than 80,000 square meters, and the transaction price was mostly within 1 billion yuan. In the context of the promotion of commercial housing sales system reform and the lengthening capital occupation cycle, housing enterprises paid more attention to the pace of development, total price threshold, and certainty of elimination.

Third, the characteristics of deep regional cultivation and continuous increase in positions have been further strengthened. After winning plot No. 21 in Zhengzhou Ersha at the end of September, Bangtai Group won Plot No. 24 in the same area in October, and continued to increase positions in the same sector; companies such as Poly Development and Binjiang Group obtained high-premium plots in familiar areas, and the removal performance of existing projects and product verification became an important basis for pricing the new plot.

Overall, land transactions in key cities remained lackluster in October. Investment by housing enterprises further converged towards “certainty”. Premium competition focused on plots with core locations, low density and small size, controllable total prices, and sales verification. Subsequent land market trends will depend on the sustainability of the stabilization of housing sales, the degree of improvement in corporate capital, and the actual impact of the implementation of local rules.

Local rules: The reform of the commercial housing sales system in October entered a period of intensive implementation of rules and has already been implemented in 17 cities

In October, the reform of the commercial housing sales system entered a period of intensive implementation of rules. Wuhan, Tianjin, Hangzhou, Shenzhen, Ningbo, Shiyan, Wenzhou, Suzhou, Hefei, Chengdu, Changsha, Xi'an, Jinan, and Nanjing introduced implementation rules one after another. As of the end of October, 17 cities had introduced rules.

Judging from the rules that have already been introduced, all regions use August 28 as an important point, and generally require that newly announced plots be selected first for sale, and that the main structure should be capped; a transition period is also set for various in-transit projects, which can be executed according to the original pre-sale conditions within a certain period of time, and the supervision of pre-sale funds is strengthened; at the same time, all regions have optimized land concession payment arrangements, and often stipulate that the down payment within 30 days is not less than 50%. Support phased development and instalment processing Construction permits, instalment inspections, etc.; in terms of mortgage loans, all regions require pre-sale permits for projects starting August 28, and personal housing mortgage loans can only be issued after completion and filing.

In addition, Wuhan, Suzhou, and Xi'an all mentioned letter replacement. Among them, Wuhan allows projects implementing the original policy to replace no more than 30% of the funds required for completion and delivery, and the balance after replacement is not less than 70%; Suzhou allows stock projects that have been completed before August 28 to continue to apply using existing documents; Xi'an further clarifies that replacement funds must be used exclusively for engineering construction, and future guarantee replacement policies are expected to become supporting policies for new pre-sales in more cities.

Land to be auctioned in November: Nanjing, Chengdu, Suzhou, and Beijing lead in the amount to be auctioned

According to monitoring by the China Index, as of November 1, the total starting price of residential land to be auctioned in 300 cities still reached more than 230 billion yuan. By city, Nanjing (51 cases, 26.15 billion yuan), Chengdu (63 cases, 18.43 billion yuan), and Suzhou (45 cases, 18.08 billion yuan) ranked in the top three for the amount of money to be sold, while cities such as Wuhan (17, 7.35 billion yuan), Hangzhou (7 cases, 4.90 billion yuan), and Tianjin (11 lots, 3.52 billion yuan) also had many plots to be shot. Also, in terms of first-tier cities, all four first-tier cities had land for sale involving residential use in November, with a total of 12 cases and a total starting price of 25.43 billion yuan, of which Beijing (4 cases, 11.5 billion yuan).

epilogue

Two months after the August 28 New Deal, the policy's impact on the land market is still in the early stages of transmission. In October, the scale of residential land transactions and concessions in 300 cities increased sharply year-on-year, mainly driven by concentrated supply volume in September. The transaction structure was still dominated by third- and fourth-tier cities. The average premium rate fell to a low level in recent years, and the overall land market is still low.

In the medium to long term, adjustments to the new pre-sale and current sales systems delay sales repayment nodes, increase the use of development capital, and reduce the capital turnover efficiency of housing enterprises. Housing companies' ability to invest and bear land prices is still constrained by factors such as weak sales recovery, delivery of stock projects, and debt repayment. The intensive implementation of local rules has further clarified the policy application boundaries for old and new projects. Supporting arrangements such as installment payment of land prices help ease some of the financial pressure, but it is difficult to completely offset the impact of capital occupation caused by the lengthening of the development cycle.

Looking ahead to the end of the year, land supply and transactions in key cities are still on a certain scale, but land acquisition by housing enterprises is expected to continue the prudent trend, and investment will be further concentrated on high-quality land plots in core cities. Plots with a core location, low density and small size, controllable total price, and district sales verification are still expected to attract the attention of enterprises. The extent of subsequent land market restoration still depends on the sustainability of the stabilization of housing sales, improvements in corporate capital, and the actual implementation of local policies.