Year-end land grab battle: Central enterprises and state-owned enterprises frequently acquire "land kings"

As the year-end approaches, real estate companies have started a "land grab" mode, with "land kings" continuously emerging in hot cities.

On December 3rd, the state-owned enterprise Huafa Properties acquired a piece of land in the main city of Zhuhai for a total price of 3.45 billion yuan, equivalent to a floor price of 16,007 yuan/square meter, setting a new record for the total price "land king" in the main city of Zhuhai.

Just the day before, the joint venture of China Resources and China Overseas had acquired the annual "land king" in Shenzhen for a total price of 18.5 billion yuan.

At the end of November, Poly Development won the single price "land king" in the Tang Town area of Pudong, Shanghai for 3.3 billion yuan, with a floor price of 44,008 yuan/square meter and a premium rate of 26.56%; Greentown China won the "land king" in the Dongxin area of Hangzhou for 1.716 billion yuan; and Binjiang Group acquired the land parcel of the Hangzhou Olympic Sports Center in Xiaoshan District for a total price of 3.954 billion yuan, setting the second-highest floor price in the history of land transfers in Hangzhou.

The continuous emergence of "land kings" in hot cities has not only significantly narrowed the year-on-year decline in land acquisition totals for the top 100 real estate companies in the first 11 months but also promoted the growth of land transfer fees across various regions.

Yang Xiao, an analyst at the China Index Academy, stated that first-tier cities like Beijing and Shanghai have continuously released multiple high total price land parcels, all of which have been acquired by leading central state-owned enterprises, significantly narrowing the year-on-year decline in land acquisition totals for the top 100 companies. The acquiring companies are still concentrated among central state-owned enterprises and local state-owned assets, while private real estate companies remain relatively cautious in land acquisition.

At the same time, some industry insiders believe that although the land market in first-tier and hot cities is heating up, there is also an issue of uneven heat in the land market. Overall, the downward trend in land transactions during the current cycle has not changed.

Central State-Owned Enterprises and State-Owned Enterprises Show Strong Will to Replenish

Since the end of September, driven by a series of real estate policies, the heat of the land market has gradually rebounded.

According to statistics from the China Index Academy, in November alone, the land transfer fees for residential land in 300 cities nationwide increased by 23.4% year-on-year to 319.9 billion yuan. One of the main reasons for the rise in land transfer fees is that core cities are accelerating the release of quality land parcels at the year-end, boosting the enthusiasm of real estate companies for land acquisition.

After the return of heat to the land market, the year-on-year decline in land acquisition amounts for the top 100 real estate companies in the first 11 months has also narrowed. According to data from the China Index Academy, in the first 11 months, the total land acquisition amount for the top 100 real estate companies was 743.18 billion yuan, a year-on-year decrease of 31.5%, which is a narrowing of 7.1 percentage points compared to the decline in the first 10 months.

In terms of new value added, China Resources Land, Poly Development, and Greentown China ranked in the top three, with new values of 109.1 billion yuan, 100.1 billion yuan, and 95.8 billion yuan, respectively.

It is evident that the pattern of central state-owned enterprises and state-owned enterprises as the main players in land acquisition has not changed. Especially in the past month, the determination of leading central state-owned enterprises and state-owned enterprises to replenish their land has been relatively firm.

In the seventh batch of land transfers in Shanghai, out of 10 land parcels available for bidding, China Resources Land registered for 8 parcels, China Overseas also registered for 7 parcels, and Poly Development registered for 6 parcels. From the final results, both Poly Development and China Resources Land successfully acquired 3 parcels, while China Overseas, Yuexiu Property, and others also made gains In Beijing and Shenzhen, during the bidding for two high-priced land parcels, both China Resources Land and China Overseas Property were present. Ultimately, the Beijing parcel was solely acquired by China Overseas Property, while the Shenzhen parcel was jointly secured by both companies.

Generally speaking, considering factors such as annual settlement and cash flow for real estate companies, the enthusiasm for land acquisition at the end of the year is often not as high as at the beginning of the year. However, this year, the situation has clearly changed. Why have these central and state-owned enterprises erupted with high enthusiasm for land acquisition at the end of the year?

Li Yujia, chief researcher at the Housing Policy Research Center of the Guangdong Provincial Urban and Rural Planning Institute, believes that on one hand, after entering November, local governments began to release "hidden" land parcels, which are of higher quality. On the other hand, developers are entering a stage of replenishing inventory. More importantly, the land parcels currently available in the market come with no series of restrictions, making it unprecedentedly friendly and beneficial for developers. Some brokerages estimate that the profit margin for land parcels sold this year is between 10% and 30%.

Frequent High-Premium Land Parcels, Uneven Market Conditions

In addition to the frequent appearance of "land kings," high premium rates have also become a significant feature of the recent land market.

At the end of November, among the 10 parcels of land sold in Shanghai, 7 were sold at a premium, with premium rates all exceeding 10%, and the average premium rate reaching 20%, making it the highest batch of premium rates among several batches of land sales in Shanghai for 2024. Among them, the premium rate for the Yangsi parcel in Pudong, Shanghai, exceeded 40%.

Similarly, the premium rates for two parcels in Chengdu's High-tech Zone and Jinjiang District also exceeded 40%. Additionally, in November, the premium rates for land parcels in the East City New Area of Hangzhou, the Olympic Expo Center, and the Zhijiang Resort Area all exceeded 33%.

According to statistics from the China Index Academy, among the 22 key cities that sold land on November 2024, there were 18 parcels with premium rates exceeding 10%, with the highest premium rate reaching 46.1%.

However, the recovery of the land market is currently limited to high-quality parcels in hot cities.

From the overall situation of the national market, the land market is still in a downward cycle. According to data from the China Index Academy, in the first 11 months of this year, the land supply area in 300 cities decreased by 21.5% year-on-year, the land transaction area decreased by 28% year-on-year, and the land transfer fees decreased by 21.7% year-on-year. In November alone, the transaction area of residential land in 300 cities nationwide decreased by 12.9% year-on-year.

Song Hongwei, research director at the Soochow Securities Research Institute, believes that the differentiation in the land market is becoming increasingly evident. The strategic layout of developers has shifted from core first and second-tier cities to key first-tier cities, especially the core parcels in core cities, which have become the focus of competition among leading real estate companies. This is also the reason for the emergence of high premium parcels.

However, Song Hongwei stated that the current land market is not showing signs of warming; it is merely that individual parcels have some heat, while the overall situation is not good. The frequent occurrence of "land kings" in certain areas indicates that the industry's risk aversion sentiment is relatively high, which actually highlights the downward pressure on the real estate market.

Regarding the future trend of the land market, Song Hongwei believes it "will further decline." Because only core area parcels are being competed for, and there are currently not many core parcels available, the supply volume is decreasing At the same time, from an inventory perspective, in first-tier cities like Shanghai, the inventory in core areas is also rising, while the number of customers remains relatively stable, which will face destocking pressure in the future.

"Next year, real estate companies will be even more cautious in land acquisition, only selecting the most premium plots. There will also be 'land kings' next year, but the quantity will be less," said Song Hongwei.

Author of this article: Fu Shanshan, source: China Real Estate News, original title: "Year-End Land Grab Battle: Central Enterprises and State-Owned Enterprises Frequently Acquire 'Land Kings'"

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