According to Zhitung Finance APP, a report published by CRIC Real Estate Research indicates that looking forward to next year, thanks to the monetary policy reiterating 'moderate easing' and the continued advancement of industry destocking and stabilizing confidence measures, it is expected that by 2025 there will be more transactions of high-quality, high-priced land parcels. In terms of land transaction scale, it is also expected to stabilize at a low level matching the scale of Commodity Transactions. As for corporate investment, although sales have warmed up somewhat currently, facing the challenge of sharply rising inventory turnover, the main task for most market-oriented enterprises at this stage remains reducing their own inventory, and corporate investment will still be in a bottom-building phase in 2025.

CRIC Real Estate Research suggests that in the context of prioritizing market stability and destocking as the industry's primary mission, the land transaction scale will continue to decline in 2024. As of December 20, 2024, the nationwide building area of land transactions across 300 cities has decreased by 17% year-on-year. It is expected that the total annual transaction volume will drop to approximately 1.1 billion square meters, which is almost on par with the volume of Commodity Transactions. From a city perspective, it has become the norm in 2024 for land transaction volumes to be lower than that of Commodity Transactions, thus officially leading the industry into a new cycle of destocking. Regarding the enthusiasm for land auctions, due to the local authorities' proper regulation of supply and demand, along with market stabilization measures such as the easing of restrictions and regulatory adjustments, some core land parcels are still very competitive, allowing the annual premium rate to remain stable at around 4%.

Transaction area: Year-on-year decline has narrowed to 17%, the first year-on-year decline below 20% since 2021.

As of December 20, 2024, the nationwide building area of land transactions in 300 cities is 1.03 billion square meters, a 17% decrease compared to the same period in 2023. To promote the alleviation of industry inventory pressure, the contraction speed of the land market transaction scale has noticeably accelerated compared to the Commodity Market in recent years, with the nationwide land supply scale dropping significantly year after year. Compared to the peak in 2020, the annual land transaction volume has fallen by more than 60% over the past four years. However, the 17% year-on-year decline is the lowest since 2021. According to the publicly announced data estimates, the total land transaction volume for the entire year of 2024 is expected to be around 1.1 billion square meters, which is already close to that of annual new home transactions. Considering the unmarketable portions in land transfers, such as allocated land and Indemnificatory Apartments, the scale of land designated for sale of Commodity Housing has now become smaller than that of new home transactions, thus the industry has officially entered a destocking cycle, and the narrowing of land transaction's year-on-year decline is also understandable.

1. The scale of transactions has declined uniformly year-on-year, with first and second tier cities improving quality while reducing volume to destock.

In terms of city levels, the land transaction scale in each level city continues to narrow, with a larger year-on-year decline in first and second-tier cities. The total transaction scale in first-tier cities is 18.5 million square meters, a decrease of 30% compared to the same period last year. By city, except for Peking which saw a 15% year-on-year decline in transaction scale, the remaining cities had a decline of more than 20%. For example, Shanghai, with new housing transaction volume close to 14 million square meters since 2024, only completed 5 million square meters of commercial land transactions by the time of writing. As the first-tier city with the highest market health in the country, it is also slowing down the land supply rhythm and reducing inventory scale to accelerate market stabilization in 2024.

In second and third-tier cities, transaction scales continue to shrink as well, with second-tier cities experiencing a significant drop of 21% year-on-year, and third and fourth-tier cities declining by 16% year-on-year. After several years of leading the decline, the land transaction scale in third and fourth-tier cities is approaching the bottom, with little room for further decline while ensuring the scale of major city projects. In contrast, many second-tier cities have seen significant declines, such as Changchun, Shenyang, Changsha, Tianjin, and Suzhou, all experiencing year-on-year declines of around 50% or more. For instance, Tianjin has only transacted about 4 million square meters of commercial land since 2024, which is less than 40% of the new housing transaction volume, coupled with market stabilization policies like lifting restrictions to support demand, resulting in an average new housing sales rate over 50% in Tianjin in 2024, making it one of the benchmark cities for market stabilization.

2. The transaction scale in cities has generally shrunk, with only Xi'an expected to maintain a transaction volume of around 20 million square meters for the entire year.

As of December 20, no city has a transaction building area exceeding 20 million square meters. Even from the annual estimated data, including the land announcements in the last ten days, it is expected that only Xi'an will exceed 20 million square meters for the entire year. In 2023, five cities including Changsha, Chongqing, Xi'an, Yancheng, and Xuzhou reached this status. The disappearance of "big transaction" cities for land is both synchronized with the decrease in new housing transaction scales and reflects the active adjustment of land supply rhythm by local authorities to reduce supply scale in order to restore the market supply and demand.

Even Xi'an, which ranks first and has performed well under pressure in the new housing market and is in a rapid urban development stage, has moderately reduced its land supply scale, with land transactions in 2024 decreasing by about 6% year-on-year. In third-tier cities like Xuzhou, Changzhou, and Nantong, the year-on-year decline in land transaction scale in 2024 exceeds 30%. For instance, Changzhou has clearly stated in 2024 that it will stop supplying ordinary residential land and will no longer construct Indemnificatory Apartments, with the newly added land in the second half of 2024 generally having a plot ratio of below 2.0, indicating low-density improvement housing land.

As for the few cities in 2024 with year-on-year increases in land transaction volume, most have many key projects driving them, or the previous base was too low, such as Linyi, where the land transaction scale drastically shrank to around 5 million square meters in 2023, while the land transaction area exceeded 9 million square meters in 2024, a year-on-year increase of 62%. However, relative to its around 10 million square meters of commercial housing sales scale, it is still within a reasonable range.

From the perspective of city levels, no first-tier cities made the list, six second-tier cities made it, one less than last year, while as many as 14 third and fourth-tier cities were included, one more than last year. This is consistent with the changing trend of land transaction scale in each city level, further reducing the number of high-level cities on the list as transaction scales shrink rapidly.

The land acquisition and construction rate in key cities is less than 50%, only profitable projects will be launched.

1. The overall construction rate of residential land transactions from 2023 to the first half of 2024 is 46%, with severe polarization in construction.

CRIC has surveyed 30 typical cities. Among the residential land transactions in these 30 cities from 2023 to the first half of 2024, the overall construction rate reached 47%, but there are significant differences between different levels.

The construction rate in first-tier cities reached 84.6%, while in second-tier cities, it significantly dropped to 40.7%. This means that currently, outside of first-tier cities, the construction situation for land transactions more than a year and a half old is not ideal, especially in some second-tier cities with a high number of non-market-driven land acquisitions, where prolonged delays in construction have become a norm, resulting in land supply becoming 'ineffective supply'.

2. The overall opening rate in the 30 cities is only 36.1%, with cities like Peking and Hangzhou performing outstandingly.

Further analyzing the construction situation into the opening situation, the opening rate of residential land transactions in the key 23 cities from 2023 to the first half of 2024 has further declined to 36.1%, a decrease of 11 percentage points compared to the construction rate. Among them, the average opening rate in first-tier cities is 67.9%, while in second-tier cities, it is only 35%.

The enthusiasm for starting and launching projects is affected by various factors, including the low activity level of the urban market, high inventory levels, continuous support from city investment, and the financial situation of developers. Notably, the financial capacity of developers will directly impact whether projects can proceed normally and achieve the expected progress. Overall, the opening rates in cities such as Peking, Hangzhou, and Shanghai are significantly higher than in other cities.

3. Most of the projects that can be launched are profitable.

Among the projects that have been launched, the dynamic profitability assessments combining construction costs and financing costs reveal that most launchable projects in various cities are profitable. For instance, the profit ratio in cities like Jinan, Hefei, and Qingdao exceeds 80%, while cities in the CNI Yangtze Index such as Suzhou, Ningbo, and Nanjing also have profitability rates exceeding 50%.

However, it is noteworthy that if we consider the profitability ratio of cities and the situation of land acquisition and project launches, although most launching projects in cities are profitable, the opening rates remain low. For example, Shenzhen's rate is only 20%, and in Jinan and Qingdao, the number of acquired and launched projects in the past year is over 20, with a profit ratio exceeding 90%, but the actual opening rates are less than 25%. This indicates that under the current market conditions, only projects with high certainty of profitability are likely to be launched by enterprises.

Currently, the logic behind enterprise launches has changed significantly from the past. During the high turnover and rapid growth phase, even if high-priced land was acquired, enterprises would actively launch projects without profitability in pursuit of scale. However, in this round of long-term bottoming and recovery in the industry, enterprises are more cautious, focusing on traffic and revenue. Therefore, only projects that are financially viable and can be profitable will be pushed to market.

The investment力度 of enterprises continues to shrink, with state-owned enterprises reducing land acquisition amounts by 46%.

1. Corporate investment has decreased for three consecutive years, with investment willingness at a historical low. In 2024, the investment of real estate companies continues to be sluggish, with the new value of land reserves among the top 100 real estate companies being 2206.1 billion yuan, total price of 1084 billion yuan, and constructed area of 10.687 million square meters, reflecting a year-on-year decline of 31%, 30%, and 20% respectively. Not only does this show a year-on-year decline, but the rate of decline has also continued to increase compared to the end of last year.

In terms of land acquisition to sales ratio, the annual ratio among the top 100 real estate companies is 0.16, representing a decrease of 0.05 compared to last year, refreshing the lowest point in nearly five years.

Looking at it by quarter, the land acquisition to sales ratio remained relatively stable throughout the year, beginning at around 0.15 in the first quarter. This ratio is significantly influenced by major state-owned enterprises, and the pace of land acquisition has not undergone significant adjustments, slightly rising to 0.16 by the end of the year.

As of the end of November, the threshold values for new value have remained in a year-on-year decline. The threshold for the new value of land reserves among the top 100 is 5.15 billion yuan, with a year-on-year decline of 13%, slightly narrowing the decline compared to the same period last year.

By tier, the threshold for the top 10 in new value has seen the most severe year-on-year decline, with the threshold at the end of November being 38.37 billion yuan, marking a 46% decline, the largest in the tiers, and the decline increased by 23 percentage points compared to the same period last year. Although land acquisition by major state-owned enterprises still provides support this year, a vertical comparison shows that the investment strength of the top real estate companies is also tightening; additionally, the thresholds for the top 20, 30, and 50 have seen year-on-year declines of 20%, 25%, and 4% respectively.

State-owned enterprises have a large investment scale, but the year-on-year decline exceeds 50%, and the phenomenon of city investment supporting the land market remains evident.

In terms of specific investment deployment by enterprises, the pattern of 2024 continues to be "a few central state-owned enterprises dominate, various local government investment companies support, and private enterprises remain sluggish." Central and state-owned enterprises are also deeply affected by the continuous bottoming out of market sales, becoming increasingly cautious in their investments. Although the investment scale remains leading, it has significantly declined compared to last year. This has also resulted in many local land markets still requiring support from city investment platform companies. While the overall amount is not as much as that of central and state-owned enterprises, the number is significant, and there has been a noticeable increase in the amount spent on land compared to last year.

Looking at the top 100 enterprises by land acquisition amount, central and state-owned enterprises still constitute the absolute main force in the 2024 land market. Despite the low number on the list, their amount accounts for a high proportion. Among them, in the first eleven months, the land acquisition amount of central enterprises accounted for 30% of the top 100, while state-owned enterprises reached 23%, showing a decrease of 10 percentage points and an increase of 6 percentage points compared to the same period in 2023. On the other hand, the amount accounted for by private enterprises is only 14%, which is a decrease of 4 percentage points compared to the same period last year. In contrast, city investment has taken on more of a supporting role under the decline of central enterprises’ investments, with city investment companies' land acquisition amount in the top 100 reaching 26%, second only to central enterprises, an increase of 15 percentage points compared to the same period in 2023.

Further breaking down by enterprise type, mixed ownership, private enterprises, and central enterprises have seen significant declines in investment amounts, with the former two exceeding 50%. The largest decline is observed in mixed ownership enterprises, which dropped by 66% compared to the same period. Jin Di has almost halted land acquisition, and Vanke's investment amount is less than 10 billion. Even for Greentown, which has been more active in land acquisition this year, the amount has decreased by 21% year-on-year. Among private enterprises, only a few scalable, national companies like Longfor, Binjiang, and Weixing still have land acquisition capabilities, with the amount in the first eleven months falling by 52% year-on-year. Meanwhile, the central and state-owned enterprises that spent the most on land also saw a decline close to 50%. Poly and China Resources had declines below 50%, while China Overseas and China Merchants saw declines of 62%. Cautious investment has become the primary strategy for many central enterprises in response to the ongoing market bottoming out. Among local state-owned enterprises, some are actively expanding beyond their home bases to tap into well-established core cities, resulting in a land acquisition amount decline of only 14%. Among them, YUEXIU PROPERTY stands out with an increase in land acquisition amount nearing 50% due to both auction and direct acquisition.mergers and acquisitions.Combining both methods, the increase in land acquisition amount approaches 50%.

It is noteworthy that while the land acquisition amounts for various types of real estate companies generally declined, city investment continued to support the land market, and the land acquisition amount grew by 36% compared to the same period in 2023.

Outlook

Looking at the changes in transactions for the whole year, the scale of land market transactions in 2024 will continue to shrink, with the transaction area hitting a new low in nearly a decade, promoting a rapid pace of inventory reduction in the industry. With only a few core quality land parcels driving the market, the overall market activity remains stable at a low level. Moving forward, based on the fact that the land supply scale has mostly tightened, the scale of land market transactions is expected to stabilize at a low level. However, from the perspective of enterprise investment, considering that most companies' cash flow and inventory turnover are still under pressure, it is expected that enterprise investment will still be in the bottoming phase in 2025.

With the combination of loose monetary policy and improved expectations on the demand side, land transactions in 2025 are expected to stabilize at a low level.

Estimating the annual data, national land transactions in 2024 will decline by more than 60% compared to the peak in 2020, with the decline much greater than that of core indicators in the industry such as commodity housing, real estate investment, and construction area. As an early indicator of the industry's inventory reduction, the continuous and substantial narrowing of land transfer scale reflects both the self-adjustment of supply and demand in the industry and the proactive contraction adjustments made by local authorities, which is conducive to establishing stable market expectations. As the land transaction area in 2024 drops to the 1 billion square meters level, with the sellable portion already below the commodity housing transaction area, the industry has entered a substantive inventory reduction cycle. In terms of land auction activity, since 2022, various regions have actively reduced land supply scale, and in 2023, the Ministry of Natural Resources initiated a pre-supply system to further promote transparency and ensure sufficient competition for land transfers. Therefore, although the scale of land transactions has significantly decreased in the past two years, the overall premium rate can still be maintained at around 4%.

Looking ahead to 2025, based on the central economic work conference held at the end of the year, thanks to the reiteration of 'moderately loose' monetary policy and the clear indication that local debt can be used for land reserve and acquisition of idle land, this will essentially accelerate the pace of inventory reduction in the industry and alleviate funding pressure on the investment side. On the other hand, considering the continued improvement in new housing market sales since October, with improved expectations on the demand side, and the exit of housing price restrictions in cities like Shanghai, Hangzhou, and Peking, along with the launch of more high-end new housing projects, there is hope for 2025 to continue seeing more high-quality, high-price land transactions, boosting confidence in the investment sector.

From the perspective of land transaction scale, given that industry inventory remains high, under the backdrop of new housing sales declining by 40% from a high point, inventory reduction will remain the main challenge the industry faces for a longer period. Therefore, the scale of land transactions must still maintain a proportionate low level in line with new housing transaction scale. Additionally, if the activation of idle land significantly increases and the transaction scale in the secondary land market increases, the transaction scale of first-level auctioned land will also need to be further reduced to accommodate the smooth pace of inventory reduction in the industry.