THE once-dormant land auction market in Chengdu, the sprawling capital of Sichuan province, has sprung back to life this spring with a flurry of record-breaking deals.
In mid-March, China Merchants Property Development secured a residential plot in the city’s High-Tech Zone after an intense 130 rounds of bidding. The state-owned giant beat off a dozen of its rivals, paying a record 31,700 yuan (S$5,705) per square metre (sq m) of floor space – a 70 per cent premium over the starting price.
The record was shortlived. Only two weeks later, C&D Real Estate, another state-backed developer from Xiamen, East China’s Fujian province, shattered it by paying 41,200 yuan per sq m for a parcel in Chengdu’s Jincheng Lake financial district, more than double the initial asking price.
Chengdu is far from alone. Fierce bidding wars for prime urban land are re-emerging across major Chinese cities. According to Huatai Securities, at least 26 land sales in Beijing, Shanghai, Shenzhen, Hangzhou and Chengdu shattered local price records that had stood for nearly a decade, producing a wave of “land kings” in the first quarter.
The rise of these record-breaking land deals signals a sharp turnaround from the deep freeze that has plagued China’s property sector since major developer defaults in 2021. While analysts see the pickup in land sales as a possible sign of recovery after a brutal three-year slump, doubts remain about the rebound’s sustainability.
These coveted plots typically share key characteristics: prime locations, low plot ratios and modest sizes with affordable starting prices, making them ideal for higher-end housing projects catering to people who want upgrade.
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“For developers, these plots offer better sales velocity and certainty, and their planning aligns with current market trends,” Huatai said in an April 7 research report.
Combination of factors
Industry experts attribute the current wave of record-breaking land deals to a combination of factors. Local governments are strategically offering premium land parcels to bolster market confidence and boost revenue.
Developers – especially cash-rich state-owned enterprises – are focusing shrinking investment budgets on prime locations. Adding to the momentum is a cautious optimism that housing sales in key markets may have bottomed out, helped by a series of government stimulus measures since late 2024.
Since then, stabilising the property market has become a priority. Beijing has introduced measures to promote home sales and ease developers’ financial woes, moves that have injected positive sentiment in major cities, feeding into the recent heat in the land auction market.
However, the market remains bifurcated. Research firm China Real Estate Information Corp (Cric) said in a March report that while top-tier cities benefit from reviving land and home sales, smaller cities are continuing grappling with an inventory overhang and a shrinking land supply.
“The industry is still in a period of deep adjustment,” said one property company executive, adding that developers’ willingness to invest hinges on the “sustainability of the housing market recovery”.
While state-owned enterprises currently dominate land acquisitions in core cities, a true market normalisation depends on broader sales recovery and the return of private developers to auctions, Cric said in a report.
Stabilising housing is seen as vital for China’s broader economic health, especially as Beijing seeks to boost domestic demand amid escalating trade tensions with the US. Wang Song, a senior investment researcher at LC Securities, warned that without stable property prices, household wealth may erode, curbing consumer spending. More support is needed if export growth weakens, he said.
Leading the charge
China’s major cities are driving the trend by accelerating the release of prime residential plots, aiming to stabilise local markets despite an ongoing national contraction in land supply.
Hangzhou is leading the charge. In the first quarter of 2025, the tech-centric capital of Zhejiang province released about 760,000 square meters of residential land across eight batches – nearly five times the 156,000 sq m offered in the same period last year. These sales generated 59.6 billion yuan, half of Hangzhou’s land sale revenue in 2024 and a 149 per cent year-on-year increase, according to the China Index Academy.
This surge marks a clear shift from late 2022 when, amid developer liquidity crises, national authorities called for reduced and optimised land offerings.
Today’s trend, however, contrasts sharply with the current national picture: residential land supply across 300 cities fell 14.7 per cent year on year (yoy) in the first quarter, with steeper declines in smaller cities. Overall land sale revenues also declined 15.9 per cent yoy, continuing a downward trend since 2022.
The rationale behind this targeted push in major cities is multi-faceted. Local governments hope releasing high-value plots will anchor the tentative market stabilisation observed since late 2024 and boost confidence, capitalising on recent government support measures.
Xie Yangchun, research head of Cric said, the aim is to “solidify the stabilising trend by generating enthusiasm in land auctions”.
And developers are responding. Jiang Tiefeng, chairman of China Merchants Property, said major cities are now betting on long-unavailable “prime plots” in core areas to tap into significant pent-up demand – which represents a “structural opportunity” for developers.
Facing tight financial constraints, developers are concentrating their limited resources on fewer, safer bets. “Many can only afford to invest in selected cities,” said an investment executive at a state-backed developer, who did not wish to be named.
Painful lessons
While bidding for select plots heats up, developers are exercising strict investment discipline shaped by painful lessons learned during the downturn.
On Apr 28, Shenzhen abruptly cancelled a scheduled auction for a prime parcel in Shenzhen’s premium Bao’an district after no developers registered for it.
Expected to fetch more than 10 billion yuan, the plot’s commercial and hotel use requirements – which increase upfront costs and risk – deterred cash-strapped developers.
In contrast, prime residential plots continue to attract fierce interest. According to China Index Academy data, the average premium rate for land auctions across 300 cities tracked rose to 13.6 per cent in the first quarter, up 8.1 percentage points yoy. Before the spring’s surge, rates had hovered below 10 per cent since late 2021, according to Cric.
The divergence across city tiers is stark. While average premiums were 16.9 per cent in first-tier cities and 19.1 per cent in strong second-tier cities, they were only 3.6 per cent in third- and fourth-tier cities, where most deals close at the asking price.
Developers are adapting to this the uneven market recovery. Having struggled to offload inventory in weaker markets, they see prime locations in top cities as the only reliable places to recoup cash quickly.
Securing land early in the year is crucial to ensure projects launch and generate cash flow within the same year, especially as project turnover slows, industry sources said.
“Signs of recovery are already evident in the land auction markets of core cities,” said China Merchants Property’s Jiang.
Yet, survival remains paramount. Jiang said his company prioritised holding substantial cash reserves – exceeding a record 100 billion yuan in 2024 – as its land acquisitions fell more than 60 per cent that year. “Ensuring safety through the winter” comes before expansion, he said.
This caution is reflected in highly selective acquisitions, favoring smaller, high-return plots.
“Every investment must guarantee a very high rate of return,” Jiang said. With home prices down more than 30 per cent in this cycle, “we cannot afford to make a bad bet”. A state-owned developer echoed this sentiment, saying investment discipline is paramount.
Sustainability in question
Views are split on whether the recent land auction heat can last.
Optimists, like You Zipei at Zhongtai Securities, believe relaxed purchase rules across the country and stabilizing trends since early 2025 could support continued recovery — at least for core city assets.
Sceptics remain unconvinced. They point to the massive contraction in overall property sales and lingering risks within the sector. “The first batch of developers grabbing land king deals might still find profit,” a property executive said.
“But if land prices keep rising, those following the trend might step on a landmine.” He noted that some pricey late-March deals in Shanghai and Hangzhou already looked risky.
Ultimately, the rebound’s fate depends on sustained housing sales recovery. March brought encouraging signs with year-on-year house sales jumping in Beijing, Shanghai, Guangzhou and Shenzhen. Hangzhou and Chengdu also saw sales jump over 20 per cent.
Yet, this recovery is largely driven by price cuts, a tactic analysts warn is unsustainable given economic headwinds and waning policy effects. No developers are making bold forecasts yet.
Industry attention is now focused on more government support. Beijing has already implemented measures over the past two years, including expanding support for urban renovation, encouraging state firms and local authorities to buy unsold homes and idle land for affordable housing development.
Expectations are now growing for more direct, potentially national-level financial support. Proposals include a central government-backed real estate stabilisation fund to backstop project completions, purchase inventory, and mitigate developer risk, as suggested by Yuekai Securities analyst Luo Zhiheng.
Further support, according to LC Securities’ Wang, could include easing purchase restrictions in first-tier cities, tax breaks for homebuyers and interest rate cuts. What is needed, he said, is a coordinated policy push to send a strong and sustained market signal. CAIXIN GLOBAL
