The city of Changchun in northeastern China was the first to auction land under the new pilot auction system this month, and so far, local governments are disappointed. Developers have been restrained from aggressive purchases, and while a few pieces of land were bid higher, most parcels transacted at the starting price. Fierce fights are expected this week and in May and June when large cities release more land on the market. Transactions in smaller third-tier cities unaffected by the new auction system are slowing even relative to last year’s levels, with cities in southeastern China outperforming those in inland and northern China. These trends would suggest a sharper slowdown in property construction later in the year, compounding the pressure already facing smaller developers.
