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 First coined during the stimulus-fuelled 2009 real-estate boom, the
Chinese expression is used to describe developers — at the time
mostly state-owned companies — willing to pay whatever it took to
secure land banks. A string of records were broken at auctions late last year, when
private-sector real-estate companies increased their presence in the
market. But while the cost of land in premier markets, or first-tier cities
such as Beijing and Shanghai, soared 135 percent in the third
quarter from a year earlier, property sale prices inched up just 15
percent, according to BNP Paribas. The already high costs and the prospect of slowing property sales
mean the days of records being set at land auctions are coming to a
close, analysts say.
Signs of a slowdown, from weaker home price data to developers
cutting prices, have already rattled financial markets in recent
weeks. Real estate investment accounts for 15 percent of China's
gross domestic product.
 "Developers will be more rational when bidding for land this year,
unlike the huge number of land kings we saw the year before," said
Lin Bo, vice-research director at real estate information provider
CRIC. "Considering the risks and costs, major developers are not
willing to pay for premium land now." Privately-owned China Vanke, the country's largest listed developer,
said on Thursday that one of its operating strategies was to not be
a land king. "When there's a lot of people after a piece of land, we'd rather
miss the land than buy wrong," said Tan Huajie, secretary of the
board. China Vanke has won 13 pieces of "premium land" in the country since
2008, making it the No 2 "land king" after state-backed Poly Real
Estate Group, according to CRIC. GOVERNMENT IMPACT Any slump in prices paid at land auctions could also have an impact
on China's indebted local governments, for whom such sales form a
major portion of revenue. An average of 24 percent of local
government revenue came from land sales in 2013, according to the
latest data from the Ministry of Finance. Chinese data last month showed that sale price rises eased for the
first time in 14 months in January, in a sign that the government's
more than four-year campaign to rein in property prices to avoid a
bubble could finally be starting to bite. This comes after a string of record-breaking prices being paid at
government land auctions. In September, Sunac China Holdings beat seven rivals to win a
residential land plot near Beijing's eastern third ring road for 2.1
billion yuan ($342 million), the ceiling price set by local
authorities.
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A day later, Hong Kong-listed Sun Hung Kai Properties, Asia's most
valuable developer, won a commercial plot in Shanghai for 21.8
billion yuan, a record high in the financial hub.
In a further sign that the market may be losing steam, some
smaller developers have already said they won't compete for sites
until market conditions improve. Private developers Yuzhou
Properties and CIFI Holdings last month said land prices have become
too expensive. "When we see two signs emerge — government easing tightening and
lower prices in the land market — then we will increase our land
bank in Hangzhou again," CIFI Chairman Lin Zhong told a press
conference last Wednesday, referring to a city about an hour from
Shanghai. Among the 10 developers that have won the most premium land since
2008, six are state-backed companies, according to CRIC. Topping the
list are Poly Real Estate, China Overseas Land and Greenland Group. Nearly 20 percent of property sold to land kings during that period
remains unbuilt, while three percent of the deals were forfeited by
developers due to financing issues after they paid deposits, it
said. With prices in first-tier cities expected to slow to single digit
growth or stay flat this year, and private developers increasingly
entering the market, the days of state-owned property companies
bidding up for premium sites are expected to draw to a close. "Fewer SOEs (state-owned enterprises) being land kings is in line
with the central government's decision to let markets play a
decisive role in the economy; they hope to lower the SOE's
contribution to the economy and encourage private investment in
construction," said Frank Chen, executive director of CBRE Research
China. ($1 = 6.1282 Chinese yuan) (Editing by Anne Marie Roantree and Raju
Gopalakrishnan)
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