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)
