The enthusiasm of real estate companies for acquiring land has shown some signs of recovery.

Recent data from the China Index Academy indicates that in November, driven by the successful sale of several high-value land plots in first-tier cities like Beijing and Shanghai, the total amount spent by the top 100 real estate companies on land acquisition from January to November saw a significant reduction in year-on-year decline, narrowing the drop by 7.1 percentage points compared to October. Moreover, the Yangtze River Delta remains the top region in land acquisition value among the four major city clusters.

After a period of stagnation, the investment from private enterprises has shown slight signs of improvement, especially in cities like Chengdu and Xi'an, where the land auction market is witnessing high-premium land acquisition by private companies.

Industry insiders, as interviewed by Securities China, believe that combined factors such as the introduction of a package of supportive policies since the end of September, a marked improvement in new housing market sales, and the optimization of auction rules in certain cities have contributed to a resurgence in the land auction market in core cities since November, with some quality land parcels commanding higher premiums. If new home sales can continue to improve, a moderate recovery of the land auction market in core cities is anticipated.

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Total land acquisition amount has seen a notable reduction in year-on-year decline.

Data from the China Index Academy shows that from January to November, the total land acquisition amount by the top 100 real estate companies reached 743.18 billion yuan, representing a year-on-year decline of 31.5%, which is a narrowing of 7.1 percentage points compared to the decline in January to October.

The reasons behind the narrowing decline in land acquisition amounts by the top 100 real estate companies, according to China Index Academy, include a series of optimized home buying policies rolled out in first-tier cities since the end of September, which have kept the market activity at a relatively high level, subsequently driving the short-term market activity. In November, multiple high-priced land parcels were sold in cities like Beijing and Shanghai, primarily won by major state-owned enterprises, resulting in a significant reduction in the year-on-year decline for the top 100 real estate companies, although the land acquisition activities remain predominantly concentrated among state-owned and local SOEs, with private companies still exercising caution in land acquisition.

In terms of newly added land value, the top three in terms of newly added land value from January to November were China Resources Land, Poly Developments, and Greentown China, with values of 109.1 billion yuan, 100.1 billion yuan, and 95.8 billion yuan respectively. Additionally, the total newly added land value for the top 10 companies amounted to 703.7 billion yuan, accounting for 32.0% of the top 100 real estate firms, with the threshold for newly added value set at 10 billion yuan.

In terms of land acquisition amounts across various urban clusters, the Yangtze River Delta continues to lead among the four major urban clusters. From January to November, the top 10 companies in the Yangtze River Delta acquired land worth 160.96 billion yuan, maintaining its position at the forefront, while the top 10 companies in the Beijing-Tianjin-Hebei region captured 107.2 billion yuan, ranking second. According to the China Index Academy, both the Yangtze River Delta and the Beijing-Tianjin-Hebei regions have seen substantial growth, largely due to the auction of several high-priced land plots in Beijing and Shanghai in November.

In terms of the top 10 companies acquiring land in key cities, central enterprises, state-owned enterprises, and local state assets continue to be the main forces, while private enterprises are primarily supplementing land reserves in key areas. Poly Developments has entered the top ten in terms of land acquisition in cities such as Beijing, Shanghai, Xi'an, and Chengdu, ranking second in both Shanghai and Xi'an; China Overseas Property, Greentown China, and China Resources Land also secured positions among the top ten in three cities. Binjiang Group is focused on Hangzhou, ranking first in land acquisition amounts there, with regional enterprises like Jinjiji Real Estate and Rundafeng Binjiang intensively increasing land reserves in key cities.

When observing the top ten total prices of residential land transactions across the nation, the high-value land plots in November were primarily located in Beijing and Shanghai. Among the listed parcels, the plot in the Chaoyang District of Beijing, comprising the Jiuxianqiao, Xiaohongmen, and Shibali Districts, topped the list with a total price of 15.332 billion yuan, setting a new record for land sales in Beijing. Overall, Beijing had four plots in the list with a total transaction amount of 29.32 billion yuan; Shanghai had five plots on the list totaling 22.14 billion yuan; and Hangzhou had one plot included.

Some private companies have engaged in high-premium land acquisitions in second-tier cities.

Recently, there have been instances of some private companies acquiring land at high premiums in key cities.

On November 20, three residential plots in Hangzhou were sold at a premium, totaling 5.137 billion yuan. Among them, the most notable plot, located near the Olympic Sports Center in Xiaoshan District, was acquired by Binjiang Group for 3.954 billion yuan, with a floor price of 48,186 yuan/m², and a premium rate of 33.85%, making it the second-highest building price for residential land transactions in Hangzhou.

According to the China Index Academy, the investment from private companies has recently seen a slight rejuvenation after a significant period of stagnation, showcasing some bright spots, particularly in the land auction markets of Chengdu and Xi'an where high-premium land acquisitions by private companies have been reported.

Statistical data from the China Index Academy indicates that during the land transaction period post the arm of the new housing market policies (September to November) in 30 major cities, instances of high-premium land acquisitions (premium rates exceeding 20%) by private companies were notably present in Chengdu and Hangzhou. In Chengdu, a residential plot in the High-Tech Zone was acquired by Jinhao Investment on November 6 for a total price of 2.07 billion yuan, representing a premium rate of 46.11%, setting a record for floor price in the High-Tech Zone, while the previous high-profile plot in Chengdu was secured by Beihou Home for 1.08 billion yuan with a premium rate of 42.19%. Hangzhou has also remained relatively active in terms of land acquisitions by private companies, with firms like Binjiang and Tianyang engaging in high-premium land purchases.

Additionally, cities like Xi'an, Ningbo, Hefei, and Nanning have also reported instances of high-premium land acquisitions by private companies recently, albeit in smaller numbers, mainly involving plots valued below 1 billion yuan. Even when private companies do engage in high-premium acquisitions, there's a pressing need to control overall land costs.

The China Index Academy has noted that since 2024, the inertia of investment from private enterprises has become the norm. While a few promising plots have emerged recently, the overall trend has not shown significant improvement. From the statistics compiled of residential land transactions in 30 cities from January to October, investment from private enterprises accounted for only 15% in financial value and 20% in building floor area.

According to statistics from the China Index Academy, as of the end of October, among the top 100 enterprises in terms of investment-grade land acquisition amounts, there were only 18 private enterprises, whereas state-owned and central enterprises accounted for 27%, and municipal investment companies made up 55%. In terms of financial amount distribution, private enterprises had a share of only 19%. Despite a similar limited number of state-owned and central enterprises, their investment accounted for 51% owing to their stronger financial capacities, while municipal investment companies had a mere 30% share.

Hu Zhengjin, deputy director of research at the China Index Academy, commented in an interview that, currently, the overall scale of land acquisition by real estate companies is shrinking, with strategies now focusing more on high-quality plots in core cities. There’s a clear divergence in the land markets across cities. Supported by policies rolled out at the end of September, notable improvements in new housing market sales, and the optimization of some land auction rules, we have seen a revival in the land auction markets of core cities since November, with some quality plots witnessing considerable premiums. Looking ahead, if new housing sales continue to improve, a gentle recovery in the land auction market in these core cities is expected.