Land Price Levels by Use in Major Chinese Cities, First Quarter of 2017 (yuan/square meter)

Land Price Levels (yuan/square meter) for the Three Key Regions in the First Quarter of 2017

Land Price Levels (yuan/square meter) for First-, Second-, and Third-Tier Cities in the First Quarter of 2017

Urban Land Price Dynamic Monitoring Group, China Institute of Land Surveying and Planning

■ Overall Situation

In the first quarter of 2017, China’s macroeconomy continued its steady and improving trend, and the overall level of land prices nationwide maintained a moderate upward trajectory. Residential land prices saw a slower month-on-month growth rate but a higher year-on-year growth rate; commercial and service land prices recorded double-digit increases both month-on-month and year-on-year; while industrial land prices experienced declines in both month-on-month and year-on-year growth rates.

The overall level of land prices in China’s major monitored cities stood at 3,880 yuan per square meter. Among these, commercial and service land prices, residential land prices, and industrial land prices were 7,017 yuan per square meter, 6,040 yuan per square meter, and 787 yuan per square meter, respectively. The month-on-month growth rate of commercial and service land prices was 1.16%, up by 0.20 percentage points from the previous quarter. The month-on-month growth rates of comprehensive, residential, and industrial land prices were 1.40%, 2.06%, and 0.62%, respectively, down by 0.03, 0.12, and 0.02 percentage points from the previous quarter. The year-on-year growth rates of comprehensive, commercial and service, residential, and industrial land prices were 5.77%, 3.76%, 8.72%, and 2.73%, respectively, with changes from the previous quarter of 0.46, 0.67, 0.81, and -0.11 percentage points, respectively. Residential land prices showed relatively rapid growth, while commercial and service land prices and industrial land prices remained relatively stable.

Residential land prices in the three key regions continued to grow at a high year-on-year rate, and land price growth rates for all uses in the Pearl River Delta region rose year-on-year.

In the first quarter of 2017, the average comprehensive land prices in the three key regions were all higher than the national average and showed an overall upward trend. The comprehensive land prices in the Yangtze River Delta, the Pearl River Delta, and the Bohai Rim region were RMB 5,619 per square meter, RMB 6,817 per square meter, and RMB 4,159 per square meter, respectively.

From a quarter-on-quarter growth perspective, the Pearl River Delta region saw relatively rapid growth in comprehensive land prices, with a growth rate of 2.67%, unchanged from the previous quarter. The Yangtze River Delta and the Bohai Rim regions experienced slow growth in comprehensive land prices, with growth rates of 1.00% and 1.66%, respectively—down by 0.58 and 0.35 percentage points from the previous quarter.

In the Yangtze River Delta region, the growth rates of commercial-service, residential, and industrial land prices were 0.46%, 1.68%, and 0.57%, respectively, changing by 0.04, -1.44, and 0.01 percentage points from the previous quarter. As a result, the growth rate of residential land prices has slowed down and entered a low-growth range. In the Pearl River Delta region, the quarter-on-quarter growth rates of commercial-service, residential, and industrial land prices were all higher than those in other regions, standing at 1.61%, 3.68%, and 1.95%, respectively. These rates changed by -0.56, 0.27, and -0.02 percentage points from the previous quarter. The growth rate of residential land prices remains at a high level. In the Bohai Rim region, the growth rates of commercial-service, residential, and industrial land prices were 1.53%, 2.55%, and 0.62%, respectively, changing by 0.02, -0.58, and -0.19 percentage points from the previous quarter. The growth rate of residential land prices has slowed down but remains at a relatively high level. Among the three key regions, the growth rates of residential land prices in nine cities—Shanghai, Jiaxing, Shenzhen, Shunde District of Foshan, Zhongshan, Beijing, Tianjin, Tangshan, and Langfang—all exceeded 3%, indicating that residential land prices in these cities remain at a high level.

From a year-on-year growth perspective, the composite land price growth rates in the Yangtze River Delta, the Pearl River Delta, and the Bohai Rim region were 6.32%, 10.88%, and 7.19%, respectively, representing changes of -0.47, 0.63, and 0.18 percentage points from the previous quarter. The Pearl River Delta maintained a high average growth rate, while the Bohai Rim region continued to see relatively high average growth. The Yangtze River Delta, meanwhile, remained in a phase of low-speed growth.

The growth rates of commercial and residential land prices in the three key regions continue to show an upward trend. In the Yangtze River Delta region, the growth rates of commercial and residential land prices, as well as industrial land prices, were 1.45%, 12.06%, and 2.72%, respectively, representing changes of 0.28, -0.72, and -0.54 percentage points compared to the previous quarter. In the Pearl River Delta region, the growth rates of commercial and residential land prices, as well as industrial land prices, rose by 0.37, 1.09, and 0.18 percentage points, respectively, reaching 7.00%, 14.50%, and 8.34% for the quarter. Among these, Shenzhen’s residential land price growth rate was 8.75%, while other cities all exceeded 10.0%, with Zhongshan reaching as high as 22.15%. In the Bohai Rim region, the growth rates of commercial and residential land prices, as well as industrial land prices, were 5.67%, 10.90%, and 3.19%, respectively, showing changes of 0.13, 0.76, and -0.52 percentage points compared to the previous quarter.

In first-tier cities, the month-on-month growth rate of residential land prices has slowed down, while in second-tier cities, both the month-on-month and year-on-year growth rates of commercial and residential land prices have risen.

Among the key monitored cities, in first-tier cities, aside from industrial land prices which continued to show a slight month-on-month increase, the growth rates of all other land uses—both month-on-month and year-on-year—slowed down. In second-tier cities, with the exception of industrial land prices, which saw a slight narrowing of their month-on-month growth rate, the month-on-month and year-on-year growth rates of all other land uses showed an upward trend. In third-tier cities, the month-on-month and year-on-year growth rates of various land uses varied considerably: with the exception of commercial and service land, which saw a slowdown in month-on-month growth, only industrial land experienced a slowdown in year-on-year growth. As for residential land prices, those in first-tier cities, as well as in some cities surrounding Beijing and in the Pearl River Delta region, remain at high levels; meanwhile, most second- and third-tier cities are experiencing moderate upward trends, reflecting significant market differentiation.

In first-tier cities, from a month-on-month perspective, the average growth rates of land prices for comprehensive use, commercial and service purposes, and residential properties were 2.39%, 1.56%, and 3.25%, respectively—down by 0.40, 0.61, and 0.80 percentage points from the previous quarter. The growth rate of industrial land prices was 1.83%, up by 0.12 percentage points from the previous quarter. In Beijing, Shanghai, and Shenzhen, residential land prices continued to grow at a month-on-month rate exceeding 3.0%, maintaining relatively rapid growth; Shenzhen’s residential land price growth turned positive from negative, while Beijing, Shanghai, and Guangzhou showed signs of slowing down. From a year-on-year perspective, the average growth rates of land prices for comprehensive use, commercial and service purposes, residential properties, and industrial land were 12.06%, 7.15%, 17.82%, and 8.04%, respectively—down by 0.99, 0.26, 1.78, and 0.48 percentage points from the previous quarter. With the exception of Shenzhen, the year-on-year growth rates of comprehensive and residential land prices in all other cities exceeded 10%, remaining at high levels.

In second-tier cities, with the exception of commercial and service land prices, which showed a slowing month-on-month growth rate, the month-on-month and year-on-year growth rates for all other land use types were on the rise. The month-on-month growth rates for comprehensive, commercial and service, residential, and industrial land were 1.50%, 1.68%, 2.04%, and 0.35%, respectively; the corresponding year-on-year growth rates were 5.89%, 4.67%, 8.37%, and 1.73%. This quarter, residential land prices in four cities—Tianjin, Qingdao, Xiamen, and Taiyuan—experienced month-on-month growth rates exceeding 3%, indicating a rapid growth trend. However, among the previously hot cities with faster price increases, the month-on-month growth rates of residential land prices in six cities—Zhengzhou, Nanjing, Hangzhou, Fuzhou, Xiamen, and Hefei—slowed down compared to the previous quarter, with Fuzhou showing the most significant slowdown, its growth rate dropping by 7.55 percentage points. Nine cities—Tianjin, Qingdao, Zhengzhou, Nanjing, Hangzhou, Fuzhou, Xiamen, Hefei, and Taiyuan—experienced year-on-year increases in residential land prices exceeding 10%.

In third-tier cities, the month-on-month and year-on-year growth rates of land prices varied across different land-use categories. The month-on-month growth rates for comprehensive, commercial-service, residential, and industrial land were 0.96%, 0.55%, 1.66%, and 0.36%, respectively; the corresponding year-on-year growth rates were 3.47%, 1.61%, 5.97%, and 1.50%. Among these, residential land prices in nine cities—Tangshan, Langfang, Anyang, Jiaxing, Shantou, Shunde District of Foshan, Zhanjiang, Zhongshan, Zhuzhou, and Yueyang—experienced rapid month-on-month increases, with growth rates exceeding 3%. In other third-tier cities, residential land prices showed stable month-on-month changes. Overall, among the 20 hot-spot cities this quarter, residential land prices in 15 cities—Beijing, Shanghai, Guangzhou, Nanjing, Suzhou, Hangzhou, Hefei, Xiamen, Zhengzhou, Wuhan, Wuxi, Fuzhou, Chengdu, Nanchang, and Qingdao—showed a slowdown in their month-on-month growth rates. Among these, the month-on-month growth rates of residential land prices in nine cities—Shanghai, Guangzhou, Nanjing, Suzhou, Hefei, Xiamen, Zhengzhou, Wuhan, and Nanchang—have narrowed for two consecutive quarters.

The number of major monitored cities showing a slowdown in the month-on-month growth rate of residential land prices is increasing.

Among cities, 92 saw month-on-month increases in residential land prices, an increase of 3 compared to the previous quarter. Among these, the growth rates in 44 cities narrowed, up by 13 from the previous quarter. A total of 17 cities experienced month-on-month growth rates exceeding 3.0%, a decrease of 5 from the previous quarter; meanwhile, 7 cities saw month-on-month declines, also fewer than in the previous quarter. In addition, the growth rates in 54 cities remained stable within the range of -1.0% to 1.0%. Compared with the same period last year, 94 cities recorded year-on-year increases, up by 2 from the previous quarter. Among them, 34 cities saw growth rates exceeding 7.0%, unchanged from the previous quarter. Specifically, in 24 cities—including Beijing—land price growth exceeded 10.0%, while Shanghai, Xiamen, Nanjing, Hefei, Taiyuan, and Zhongshan saw growth rates surpassing 20%. On the other hand, 8 cities reported year-on-year declines, down by 2 from the previous quarter.

■ Market Analysis

In the first quarter of 2017, the domestic economy’s steady and improving trend was further confirmed. The growth rate of fixed-asset investment stabilized and rebounded, and the intrinsic driving force behind investment strengthened.

Economic growth indicators are positive, supporting a moderate rise in land prices.

In the first quarter, the growth rates of industrial land prices both month-on-month and year-on-year slowed down somewhat. Meanwhile, industrial product prices remained high, driving an expansion in the Producer Price Index (PPI), and corporate profitability improved. In February and March, the year-on-year increase in the PPI for industrial producers exceeded 7% each month. Cumulative profits of industrial enterprises above designated size rose by 31.5% year-on-year, marking the highest growth rate since the same period in 2012, and industrial production and business activity continued to remain at a relatively high level. According to the People's Bank of China’s survey results for the first quarter, both banks and enterprises showed increased optimism about the macroeconomy, confirming the current trend of economic recovery. Against the backdrop of a continuously improving macroeconomy, the “Three Reductions, One Drop, and One Supplement” initiative has been deepened and is yielding tangible results. Investment growth has significantly accelerated, continuing to support a moderate upward trend in overall land prices.

Monetary policy remains prudent and neutral, and real estate developers generally have sufficient funding.

The 2017 Government Work Report stated that monetary policy should remain prudent and neutral. During the Two Sessions, the central authorities explicitly emphasized maintaining basic stability in liquidity, smoothing the transmission mechanism, and guiding more financial resources toward the real economy. Since the first quarter, credit regulation has been significantly strengthened, while overall funding conditions have remained moderately loose, supporting a moderate rise in the market. In the first quarter, the scale of new RMB loans expanded substantially: in February alone, new RMB loans reached 1.17 trillion yuan, the highest level on record for the same period. Medium- and long-term corporate loans and household loans both saw significant year-on-year increases. Looking at the sources of funds for real estate developers, among domestic funding sources, the year-on-year growth rates of self-financing by enterprises, deposits and prepayments, and personal mortgage loans all showed substantial declines. Meanwhile, the year-on-year growth rate of domestic loans continued to expand, reaching a new high in nearly two years. On the external funding side, overseas financing by domestic enterprises has been on an upward trend. According to data from the National Bureau of Statistics, from January to February, real estate developers’ utilization of foreign capital surged by 227.4% year-on-year, hitting a historical high. Overall, market funding remains relatively abundant.

Regulatory measures in hot cities are being tightened, the scope of purchase and loan restrictions is expanding, and the month-on-month growth rate of residential land prices is slowing down.

As the market in first-tier cities tightens, investment demand is spilling over to surrounding cities in popular hotspots and to central and western regions, giving rise to structurally hot areas. As a result, real estate sales in some cities are showing signs of recovery, and the land market is regaining its momentum. To maintain market stability and guide expectations appropriately, real estate regulation policies in these hot-spot cities continue to tighten and are being stepped up further.

In the first quarter, more than 40 cities across the country introduced real estate regulation policies covering a wide range of areas, including credit and housing provident fund policies, home-buying qualifications, land supply, and market supervision. In hot-spot cities, regulatory measures were implemented through raising home-buying thresholds, increasing down-payment ratios, tightening differentiated lending practices, boosting land supply, and strengthening market oversight. On the one hand, hot-spot cities continued to tighten their regulations: Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin, Nanjing, Hangzhou, Chongqing, Qingdao, Nanchang, and other major hot-spot cities rolled out a series of new policies covering various aspects. Among them, Beijing introduced nine consecutive regulatory measures within just over ten days, with both breadth and depth exceeding market expectations. On the other hand, the scope of regulated cities expanded, with some third- and fourth-tier cities joining the list of regulated cities. Areas surrounding core cities such as Zhuozhou, Chuzhou, Ganzhou, Zhangjiakou, Langfang, and Cangzhou also introduced stringent restrictions to control market transactions. As the scope of purchase and loan restrictions continues to extend to cities surrounding hot-spot areas and core cities in central and western regions, expectations for further tightening of real estate regulations this year have grown strong. The markets in hot-spot regions have entered a relatively stable phase, putting temporary constraints on real estate development investment and housing demand, and slowing the month-on-month growth rate of residential land prices.

The supply of residential land in major monitored cities increased significantly year-on-year, and its share rose accordingly.

The supply of residential land in major monitored cities increased year-on-year, and its share of total construction land supply rose to the highest level in nearly two years. In the first quarter of 2017, the land supply area in 105 key monitored cities nationwide reached 36,900 hectares, a decrease of 50.45% from the previous quarter and a decline of 4.22% year-on-year. Among these, the supply of commercial and service land, residential land, industrial, mining, and warehousing land, as well as other land types such as transportation and water conservancy infrastructure, totaled approximately 2,800, 8,400, 10,200, and 15,400 hectares, respectively, with year-on-year changes of -23.91%, 9.52%, -1.70%, and -7.84%.

In terms of supply structure, both the share of residential land supply and the share of real estate land supply have risen significantly, reaching their highest levels in nearly two years—exceeding 20%. The supply of residential land in first- and second-tier cities increased markedly year-on-year, with first-tier cities seeing an increase of over 50%, while third-tier cities experienced a slight decline. The supply of real estate land followed a similar pattern: first-tier cities showed particularly strong year-on-year growth, whereas third-tier cities saw a decline. Looking at land supply in 20 hot-spot cities, residential land supply also rose sharply year-on-year, with increases exceeding 30%. Overall, the changes in both the quantity and structure of residential land supply are consistent with the guiding principle of differentiated regulation.

On a month-on-month basis, the supply of all types of land use showed a decline, which is consistent with the typical temporal patterns of land supply.

■ Trend Forecast

In the second quarter of 2017, the overall economy is expected to continue its trend toward stabilization and improvement. However, it remains crucial to closely guard against multiple risks arising from rising factor costs, high market leverage, and tightening monetary policies both domestically and internationally. It is forecast that commercial and industrial land prices will generally remain stable without significant fluctuations. In early April, the Ministry of Housing and Urban-Rural Development and the Ministry of Natural Resources jointly issued the "Notice on Strengthening the Management and Regulation of Recent Housing and Land Supply," further clarifying the quantitative standards for city-specific land supply policies, as well as specific requirements for preparing and publishing residential land supply plans and stabilizing market expectations. With concerted efforts from various parties, the growth rate of residential land prices may slow down further.

At this stage, demand-side-oriented regulatory policies have proven effective in curbing market transaction volumes and reducing trading fervor, thus playing a stabilizing role in the market. However, fundamental, systemic, and long-term mechanisms on the supply side are still under construction.

Next, it is recommended to focus on the supply side, streamline the policy framework, and step up efforts to advance research and development of fundamental institutional mechanisms. We should pay close attention to how housing prices and leverage ratios in some third- and fourth-tier cities are evolving amid the accelerating pace of inventory reduction. On the basis of differentiated regulation, we should maintain policy stability to provide the market with sufficient room to function and adjust in an orderly manner.