Local governments generated US$233 billion from land sales in 2009, up 60% year-on-year, from the sale of 2.09 billion square meters of land in 2009, the Ministry of Land and Resources said. Developers bought 1.03 billion square meters of the total 2.09 billion square meters of land sold, an increase of 36.7% from 2008. They paid almost US$200 billion, or 84% of total local government land sale revenues.
Property developers took advantage of the government’s “moderately loose” monetary policy in last year, relying on massive bank lending to boost their land reserves. This created greater competition between developers bidding for parcels of land and so pushed up asking prices to record levels in some regions. These prices have subsequently been passed down to homebuyers, speeding up the rapid rise in property prices over the course of 2009.
Local governments have long depended on land sale revenues to keep cash flowing through their books. With local government debt having passed US$585 billion midway through 2009, Beijing is wary of taking any action which would directly or indirectly bring the real estate industry to a standstill. As a result, there will be no big policy shock but targeted tightening measures will continue.