Land sales forecast to earn lower revenue

Beijing's revenue from land sales is expected to drop by 30 percent once again this year to hit 90 billion yuan ($13.6 billion) as the city's property market cools down as a result of continuous tightening measures. If that prediction comes true, the city will see its worst year on record for raising revenue from land sales, the local bureau of finance said. In 2011, the value of Beijing land sales fell by 30 percent to hit 123.4 billion yuan, according to statistics from the local bureau of finance. The year before, it had been 176 billion yuan. Shanghai has likewise lowered its prediction for the revenue it will take in from land sales this year. The city expects to obtain 125 billion yuan from that source in 2012, down 16.2 percent from the year before, according to the local bureau of finance. The continuous fall is being attributed largely to the government's measures to cool the real estate market, including restricting the number of homes a family can buy and insisting that higher downpayments be made on home purchases. China Index Academy, a Beijing-based real estate consultancy, reported that the revenue raised from land sales in the 300 large Chinese cities that it monitors dropped by 67 percent in January from a year before. "As property sales and prices in the first half of the year are expected to decrease further, property developers will be more conservative about increasing their land bank," said Carlby Xie, head of research at the real estate consultant Colliers International (Beijing). Statistics from HomeLink Real Estate Co Ltd, a real estate brokerage firm, showed that about 4,600 new residential apartments were sold in Beijing in January, down 70 percent from the previous month and 57 percent from the same month a year ago. The price also fell by 21.3 percent from a month before to hit 18,229 yuan per square meter. The prices of homes in prime locations decreased the most. "Property sales in first-tier cities will probably fall this year by 20 percent to 25 percent below their peak in March and April of last year," Peter Choy, associate managing director for Asia Corporate Finance at Moody's Investors Service, was cited by Bloomberg as saying. With China's property market continuing to cool down, a number of economists are concerned that a larger-than-expected correction will lead to a hard landing for the world's second-largest economy. Stephen Green, chief economist with Standard Chartered Bank PLC, said the correction in China's property market will be the biggest difficulty confronting the economy this year. The International Monetary Fund has cut its forecast for China's 2012 economic growth to 8.25 percent from the 9 percent projected in September. The IMF forecast that China's economy will grow by 8.75 percent in 2013.