Land Supply Plans of Key Chinese Cities Capsize Hopes for Housing Price Gains

The slated expansion of land supply for residential development purposes across key Chinese cities is expected to dampen urban housing markets over the next five years.

The housing development plans released by major cities across China confirm a large-scale increase in land supply over the next three to five years, which analysts expect to ease tight demand in urban property markets, as well as undermine hopes for market improvements.

The municipal government of Shanghai plans to make 5500 hectares of land available for residential development during the period from 2016 to 2020, which is expected to provide 1.7 million new homes.

This project housing supply marks an increase of roughly 60% compared to the preceding 12th Five Year Plan period.

The roaring manufacturing hub of Shenzhen in the south plans to make a further 218 hectares available in 2017, for an increase in residential housing supply of 74.4% compared to the previous year.

The Fujian province of capital of Fuzhou increased residential land supply by 3.16 million square metres in 2017, for a doubling compared to the previous year, and plans to further increase supply by 19.2 million square metres over the upcoming five years, for an average annual increase equal to 140% of added supply in 2016.

Other major cities in China that have released land supply plans for the 13th Five Year Plan period from 2016 to 2020 include Beijing, Chengdu, Hangzhou, Wuhan and Xiaman.

An analyst from CRIC said to Securities Daily points out that while the Ministry of Housing and Urban-Rural Development has repeatedly emphasised the need for expansion in residential land supply in cities with strong upward pressure on housing prices, the first half of 2017 saw only a modest year-on-year increase of 3% in “operational” land transactions across China.

In second-tier cities, which have become focal points of demand following the introduction of heavier curbs on large metropolises, transaction volumes have actually fallen 3% compared to the same period last year.

According to the analyst land supply and the leasing market will be the focus of government-efforts to adjust China’s urban property markets during the 13th Five Year Plan, and significantly determine their performance over the next several years.

 

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