Domestic real estate developers may jeopardize their futures by
continuing to hoard land, academic research conducted by the
financial research center of Beijing Normal University recently
reported.
The amount of land kept in limbo by nationwide developers is
estimated to reach 1 billion square meters by the end of this year.
Approximately 25 percent of funds in the real estate market have
been used to this end, according to the research.
Zhong Wei, leader of the research, said developers could sustain
their business for at least three years on the land they hoarded, a
time period equal to the length of a real estate business
cycle.
Real estate developers put 180 billion (US$24.33 billion) to 200
billion yuan towards land hoarding each year. A total of 2.4
trillion yuan had been used for this type of business by the end of
2006. The capital is equal to the industry's current aggregate
annual sales volume, the research reported, and the expenditure is
tipping the balance sheets of real estate companies, risking the
need for bank loans.
Local governments have also been found hoarding land. Based on
the research, the country had planned to offer 2.1 billion square
meters in land to build houses for residential use, yet developers
had only purchased 1.45 billion square meters from 2002 to
2006.
Shandong, Jiangsu, Zhejiang and Sichuan Provinces had the
highest land-hoarding percentages over the past four years, which
respectively reached 8.9 percent, 8.8 percent, and a tie at 7.7
percent.
A 70-percent increase in housing prices can be attributed to
land hoarding, said Zhong. A shortage in supply spurs market
anticipation for the surge in price. If land hoarding and loose
financial policies are continued, housing prices will soar
dramatically, the research warned.
Zou Pingzuo, assistant researcher from the research bureau of
the People's Bank of China, told China Business News that
now is the time to tighten the financial policies for real estate
investors. The country's top statistics bureau has suggested
barring land-hoarding developers from entering future plot auctions
after investment in the mainland real-estate market jumped 31.4
percent in the first 10 months of this year, Shanghai
Daily reported on December 1.
(China.org.cn by Wu Jin, December 5, 2007)
