According to the Financial Association on December 30 (Reporter Li Jie), the changes in the land market in the real estate industry in 2024 have become a chapter that cannot be ignored.

Since 2021, the transmission mechanism from sales to land acquisition has weakened. The essence of this is that the behavior logic of real estate companies has shifted from a growth orientation to a safety orientation, and sales returns are increasingly used to pay off debts rather than for expansion and land acquisition, said Northeast Securities Analyst Zhang Mingyuan.

The transformation of the operational logic of real estate companies outlines profound changes in the land market under the inventory reduction wave in the real estate industry in 2024.

Analyst Ke Rui pointed out that in the context of the industry entering a new cycle of inventory reduction, from a city perspective, a key feature of the land market in 2024 is that the scale of land transactions is smaller than that of commodity housing transactions.

Ke Rui's data shows that as of December 20, 2024, the nationwide land transaction building area in 300 cities has decreased by 17% year-on-year, and the total annual building area is expected to drop to around 1.1 billion square meters, which is similar to the scale of commodity housing transactions.

The support of special bonds for acquiring existing land and the adjustment of bidding policies in first-tier cities may have a significant impact on the future land market.

Looking ahead to 2025, Zhang Mingyuan stated that the stabilization of falling housing prices will promote the recovery of commodity housing sales, and there is hope for marginal improvement on the land acquisition side. However, considering that mainstream real estate companies are still in a contraction cycle, the performance of land acquisition will continue the trend of urban differentiation, with overall performance showing a narrowing of the decline.

First and second-tier cities have become important replenishment areas for real estate companies.

In the context of stabilizing the market and reducing inventory being the primary task for industry enterprises, the scale of land transactions in 2024 will remain at a low operating status.

In terms of land transfer fees, according to data from the Ministry of Finance, from January to November 2024, the income from the transfer of state-owned land use rights was 3262.6 billion yuan, a year-on-year decrease of 22.4%.

While the new housing market continues to stabilize, the scale of national land supply has also been adjusted according to the market. Since 2022, local governments have actively reduced the scale of land supply. Additionally, in 2023, the Ministry of Natural Resources introduced a pre-supply system, further promoting the openness and transparency of land parcel information to ensure sufficient competition in land transfers. In 2024, the Ministry of Natural Resources released new regulations stating that cities with a liquidation period exceeding 36 months for commercial residences will suspend new residential land transfers.

"As a leading indicator for industry inventory reduction, the adjustment of land transfer scale is not only a self-adjustment of supply and demand rules within the industry but also reflects the proactive response from local regulatory authorities, which is beneficial for stabilizing market expectations," pointed out an analyst in the real estate industry.

In this environment, the overall trend of the land auction market in 2024 will maintain localized high activity and continuous differentiation. Especially since the new policy on September 26, some plots in core cities such as Peking, Shanghai, Hangzhou, and Chengdu have seen high premiums in bidding.

According to statistics from the Zhongzheng Institute, although the transaction scale in various cities has decreased, the proportion of land transfer fees in first-tier cities has increased, and real estate companies are further focusing on acquiring land in core cities. From January to November, the transfer fees for residential land in the top 20 cities accounted for more than half of the national total.

In terms of land auction enthusiasm, Peking, Shanghai, Shenzhen, and Hangzhou remain important replenishment areas for real estate companies, while high-quality plots in Guangzhou, Chengdu, and Hefei have seen active participation from real estate firms. Data from the Zhongzheng Institute shows that from January to November 2024, the proportion of deals above the base price for residential land in 22 cities was 24.1%, a decrease of 13.3 percentage points compared to the same period last year. By city, the proportion of premium transactions in Shenzhen, Hangzhou, and Shanghai exceeded 50%, while in Peking, Hefei, and Chengdu, it was over 30%, with other cities generally below 20%.

Current real estate companies invest in land to pursue certainty more, with high-quality land in core first- and second-tier cities becoming the focus for companies to acquire land, whereas most third- and fourth-tier cities still see little interest, creating a situation where the land market is partially hot but overall cold.

Furthermore, many large real estate companies have stated that they will adhere to the strategy of "investing based on sales", concentrating investment in first-tier and core second-tier cities.

A senior executive from a top 10 real estate company stated that the group is focusing its land acquisition strategy more on high-tier cities, especially core areas of these cities. This strategy helps ensure capital safety, navigate through economic cycles, and seize new opportunities in the land market.

It is noteworthy that in first-tier cities, such as Peking and Shanghai, land auction policies have been adjusted to restore the auction method of going to the highest bidder, which has increased the activity and competitiveness of the land market to some extent, attracting attention and competition from many real estate companies for high-quality land, positively influencing expectations in the land market.

Demand-side expectations are improving, with the exit of price limitation policies in Shanghai, Hangzhou, and Peking, as well as the launch of more high-end new housing projects, likely to drive the continued transaction of more high-quality and high-priced land parcels in 2025 and boost investor confidence.

State-owned enterprises remain the main force in land acquisition.

In terms of land acquisition companies, the pattern remains where a few state-owned enterprises dominate, multiple municipal investment platforms provide support, and private enterprises seek stability amidst progress in 2024.

According to data from CRIC, in the first 11 months, the amount of land acquired by state-owned enterprises accounted for 30% of the top 100 companies, while state-owned enterprises reached 23%, which represents a 10 percentage point decrease and a 6 percentage point increase compared to the same period in 2023 respectively; the proportion of land acquisition by private enterprises was 14%, a decrease of 4 percentage points compared to the same period last year.

In contrast, urban investment companies have taken on more of a stabilizing role against the backdrop of declining state-owned enterprise investments. Among the top 100 real estate companies, urban investment's land acquisition amount accounted for 26%, second only to state-owned enterprises, an increase of 15 percentage points compared to the same period in 2023.

In the first 11 months, the acquisition ratio of central state-owned enterprises in cities like Peking, Shanghai, Guangzhou, and Shenzhen is about 80%. In cities where land auction sentiment is weak, local state-owned capital has a higher proportion, such as in Wuxi, Shenyang, Nanjing, Fuzhou, and Changchun, where local state-owned capital accounts for more than 50%, with Wuxi and Shenyang exceeding 80%. This was stated by an Analyst from the China Index Academy.

Specifically regarding enterprises, investments from mixed ownership, private enterprises, and central state-owned enterprises have all seen varying degrees of decline in 2024.

Among private enterprises, a few scaled-up and national companies still have the ability to acquire land. Among local state-owned enterprises, some are actively expanding beyond their home bases, continuously bidding for quality plots in core cities. YUEXIU PROPERTY stands out in this regard, as it continues to invest through bidding and acquisition methods.mergers and acquisitions.The increase in the amount of land acquired is close to 50%.

The scale of investment from central state-owned enterprises remains leading, but investments are relatively cautious. This has also resulted in many local land markets still needing urban investment platform companies to stabilize them. Although the overall amount is less than that of central state-owned enterprises, the quantity is larger, and the amount of land acquired has significantly increased compared to last year, according to an Analyst from the China Index Academy.

It was further stated that although the sales side is currently warming up, from the perspective of enterprise investment, given that most enterprises' cash flow and inventory turnover remain under pressure, the main task for most market-oriented enterprises at this stage is still to reduce their own inventory. It is expected that corporate investment will still be in a bottoming phase in 2025.

Looking ahead to 2025, several Analysts pointed out that based on the tone set by the Central Economic Work Conference at the end of the year, the renewed emphasis on 'moderate easing' in monetary policy, and the clear indication that local bonds can be used for land reserves and the acquisition of idle land, will substantially accelerate the industry's destocking process and alleviate the funding pressure on the investment side.

"Currently, the Ministry of Natural Resources has implemented the rules for using special bonds to acquire existing idle land, and future fiscal policy details from the Ministry of Finance are expected to follow, providing more financial support for local implementation," said an Analyst from the China Index Academy.

"Thanks to the renewed emphasis on moderate easing in monetary policy, along with the continuous promotion of destocking in the industry and stabilizing confidence, 2025 is expected to welcome more high-quality, high-priced land transactions, with land transaction scale also expected to stabilize at a low level, matching the scale of commodity housing transactions," said an Analyst from CRIC.