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In midsummer, developers are very interested in popular plots of land, and high premium transactions are frequently seen in the land auction market. In some cities, "land kings" are born.

According to incomplete statistics, in the past July, hot plots of land appeared in Beijing, Shanghai, Hangzhou, Nanjing and other places. Some became the new "land kings" in the region, some plots were fought over after dozens of rounds of bidding, and some plots had a transaction premium rate of up to 40%.

Major cities have also repeatedly "collected money". According to data from the China Index Academy, among the top 10 cities in the country in terms of land transfer fees in July, the top 10 cities are: Beijing, Chengdu, Shanghai, Xi'an, Hangzhou, Hefei, Suzhou, Nanjing, Wenzhou, and Fuzhou. However, overall, the high heat of the land market is still a "spot-like" phenomenon, and the overall market is still showing a "shrinking" trend.

At the micro level, land auctions are still seeking to pick up; at the macro level, a new round of land system reform may be about to begin.

The industry believes that the "Decision" of the Third Plenary Session of the 20th CPC Central Committee further clarified the direction of land system reform. This new urbanization is highly related to deepening land system reform. The rational allocation of land resources and their efficient use and activation are important directions. Land prices will also be more determined by market supply and demand, and restrictive policies on land are expected to be further optimized and adjusted, such as the cancellation of land price limits in core cities.

Plots in hot cities are being fought over

In the just-concluded July, which city was the “winner” in the land auction market?

According to the "China Land Market Monthly Report (July 2024)" released by China Index Academy, among the top 10 cities in the country in terms of land transfer fees for various types of land in July, the top ten cities were: Beijing, Chengdu, Shanghai, Xi'an, Hangzhou, Hefei, Suzhou, Nanjing, Wenzhou, and Fuzhou.

Specifically for residential land, among the top 20 cities in terms of land transfer fees: Beijing ranked first with 16.6 billion yuan, Chengdu ranked second with 15 billion yuan, and Xi'an ranked third with 9.3 billion yuan; fourth to tenth are Shanghai, Hangzhou, Hefei, Suzhou, Nanjing, Wenzhou, and Fuzhou.

Judging from the overall situation in the first seven months, Beijing is still the "big battlefield" for land auctions this year. In the first seven months, the residential land transfer fees of 89.8 billion yuan ranked first, Hangzhou ranked second with 64.8 billion yuan, and Shanghai ranked third with 51.5 billion yuan; followed by Xi'an, Chengdu, Hefei, Xiamen, Nanjing and so on.

First-tier cities and hot second-tier cities are the "main battlefield" that real estate companies are competing for. Not only does the list show this feature, but the high-premium and even "land king" plots that appeared this year are also mostly located in hot first- and second-tier cities. The concentration of real estate companies' investment is becoming increasingly concentrated.

For example, in first-tier cities like Beijing, high-priced projects have frequently been sold this year, and the land auction market has been very lively. On July 25, Poly Development and Beijing Construction Engineering Group won a residential land in Haidian District, Beijing, with a total price of 8.901 billion yuan, breaking the district record and becoming the new "land king" in Haidian District.

There are many stories about this piece of land. As early as 2016, the consortium of Vanke and China Construction Group won the bid for Plot 19 in Xibeiwang Town, Haidian District for 5.9 billion yuan. However, because the project required 100% self-holding and all residential parts were to be used as rental housing, China Construction Group withdrew from Plot 19 first, and then Vanke also withdrew from the land and put it up for sale again.

Now, Poly Development and Beijing Construction Engineering have re-bid for the land after many years, but the price has increased significantly compared with the past, with the starting price and upper limit price being 8.6 billion yuan and 10.3 billion yuan respectively, compared with 4.4 billion yuan and 5.9 billion yuan in 2016. According to statistics from China Index Academy, this land was the land with the highest total transaction price for residential land in July nationwide, and the sales guidance price also reached 90,000 yuan per square meter.

In Shanghai, a first-tier city, there are also "little surprises" in land auctions. For example, after the release of the "Shanghai Nine Measures", the local government held three batches of land auctions for 2024 on July 9, and canceled the requirement of capping the land premium rate at 10%, and did not stipulate the relevant real estate linkage price in the transfer conditions. Among them, the final transaction premium rates of the Pingliang Community plot in Yangpu District and the Changbai Community plot in Yangpu District reached 21.2% and 17.1% respectively.

Hot projects in other cities are also emerging. On July 31, a plot of land was sold in Fenghuang Street, Gulou District, Nanjing. This is the first residential land launched in Longjiang section of Gulou District in recent years. After 41 rounds of bidding, Nanjing Jinjitong Real Estate Co., Ltd. won the bid with a total price of 468 million yuan, a floor price of 32,572 yuan per square meter, and a premium rate of 20.62%.

In Hangzhou, on July 30, the Baima Lake residential land in Binjiang District was put up for public sale, with a starting price of 1.946 billion yuan and a starting floor price of 20,938 yuan per square meter. The winner was determined on the principle of "the highest bidder wins". Since the residential land in this block has not been supplied for 10 years, after 42 rounds of bidding, Greentown finally won the bid with 2.716 billion yuan, with a floor price of 29,223 yuan per square meter, and a premium rate of nearly 40%.

However, overall, it is difficult to say that the current land auction market has warmed up, and the investment pace of real estate companies is relatively concentrated and cautious.

According to data from China Index Academy, from January to July 2024, the total amount of land acquired by the top 100 companies was 430.71 billion yuan, a year-on-year decrease of 38.0%, and the decline continued to expand by 2.2 percentage points compared with January to June. "The trend of focusing on high-quality plots in core cities continues, and the differentiation between the land auction market and the sales market has intensified, prompting real estate companies to remain cautious in acquiring land in the short term."

Will the share of central state-owned enterprises continue to increase?

In the land auction market during the real estate consolidation period, central state-owned enterprises are the absolute "main force" in the market.

In the first seven months of this year, the three real estate developers with the highest new cargo value were C&D Real Estate, China Resources Land and Poly Development. Among them, C&D Real Estate ranked first with a new cargo value of 62.1 billion yuan, China Resources Land ranked second with 57.1 billion yuan, and Poly Development ranked third with a new cargo value of 50.8 billion yuan; the total new cargo value of the top ten real estate developers was 431.5 billion yuan, accounting for 32.4% of the top 100 real estate developers.

Land is the "granary" of sales. Currently, not only in the land auction market, but also in the sales of central state-owned enterprises, the market share is constantly increasing.

Liu Shui, director of corporate research at China Index Academy, said that it can be seen from China Index Academy's "China Real Estate Enterprises Sales Performance Ranking from January to July 2024" and "National Real Estate Enterprises Land Acquisition TOP100 Ranking from January to July 2024" that the sales performance of some central state-owned enterprises is relatively resilient.

He said that, for example, Greentown China ranked 7th in sales in July last year and 3rd in July this year. Yuexiu Real Estate ranked 13th in sales in July last year and 9th in July this year, up 4 places. Poly Real Estate ranked 25th in sales in July last year and 17th in July this year, up 8 places. China Construction First Property ranked 39th in sales in July last year and 18th in July this year, a significant increase of 21 places.

"In the short term, the increase in the market share of central state-owned enterprises in real estate sales and land acquisition in recent years will definitely continue. Such enterprises have financing advantages and strong brand advantages, and are more resistant to risks during periods of deep market adjustments." Liu Shui believes. However, in the long term, as the real estate market gradually returns to normal, the market share of private real estate enterprises may increase again.

"There are only more than 10 central state-owned real estate enterprises with strong operating and development capabilities, and their overall scale is limited." Liu Shui said that especially at present, residents' demand for "good houses" is increasing. With a market size of 10 trillion yuan, local state-owned enterprises are unable to support the market. However, some private real estate companies have high operating efficiency and strong product power. Once the market returns to normal, these companies will be more competitive and may increase their market share.

In addition, at the macro level, the land market will also develop in a more market-oriented and high-quality direction.

The Third Plenary Session of the 20th CPC Central Committee recently proposed the following principles: "optimize land management, improve the land management system that is efficiently connected with macro policies and regional development", "establish a coordination mechanism between the allocation of new urban construction land quotas and the increase in permanent population", and "optimize urban industrial and commercial land use, accelerate the development of the secondary market for construction land, promote mixed land development and utilization, and rational conversion of land use, and revitalize stock land and inefficient land".

China Index Academy said that overall, this new urbanization is highly related to the deepening of land system reform, and the rational allocation of land resources and their efficient use and activation are important directions. In addition, land prices will be more determined by market supply and demand, and restrictive policies on land are expected to be further optimized and adjusted, such as the cancellation of land price limits in core cities.

"In the advantageous regions where the population will continue to grow in the future, the new urban construction land indicators may be better guaranteed, and the establishment of a linkage mechanism among 'people, housing and land' will be more effective." The institute said that in addition, supporting policies for properly disposing of idle stock land are also expected to be implemented faster. Activating stock land and improving the efficiency of land resource utilization are inevitable requirements for the high-quality development of the real estate industry.