Against the backdrop of a cooling housing market, the local governments of China’s 130 largest cities took in ¥1.86 trillion from land auctions in 2011, dropping 13 percent from a year earlier, according to the China Index Academy.
Shanghai was ranked first with ¥126 billion in land auction proceeds, although this amount was down 16.7 percent from 2010. In second place was China’s capital city, Beijing, which brought in ¥102 billion, 37.9 percent less than a year ago. Tianjin, Hangzhou, Wuhan and Dalian, which also ranked in country’s top 10 cities in terms of auction proceed amounts, similarly saw decreases year on year.
Several smaller Chinese cities, with historically less volatile housing markets, saw gains in their land auction proceeds during the previous year. Shenyang, in Liaoning province, for example, pulled in ¥62 billion, up 86.8 percent from a year before. Kunming, in Yunnan province, earned ¥56 billion, a 147 percent increase year on year.
Proceeds from selling land for residential development slipped 24 percent year on year, to ¥1.24 trillion or 67 percent of the total income, the Index Academy also mentions, as both sales volumes and revenues took a big blow from the government’s policies aimed at cooling the overheated real estate market. With home sales plummeting around much of urban China, many property developers are finding themselves stuck with stockpiles of unsold inventory going into the new year and limited access to bank funds for new projects.
During the course of the past decade, land auction sales became major sources of revenue for local governments, who used the proceeds to fund infrastructure development, support public works projects and finance local payrolls. Diminishing returns from land sales have led some to speculate that local governments may run into debt problems in the new year.
Although the central Chinese government has hinted that it will fine-tune some of its economic policies in the first quarter of 2012, so far China’s top leaders have stood firm in their resolution to maintain policies aimed at reining in the country’s housing sector.