Chinese land market cools

Chinese cities have seen a decrease in the number of residential property transactions. As a consequence, the land market has also cooled, with unsuccessful land auctions and even the return of land by property developers.

Sunshine 100 Real Estate Group has developed more than 20 projects in over 10 Chinese cities.

But last year, the company bought only one piece of land. And the president of the company says it was good that he didn't buy more at the time.

A property developer based in Fujian Province has returned some land it bought last year, forfeiting the company's security deposit of 700 million yuan. The final price of the land was 1.1 billion yuan after 440 rounds of bidding.

Industry insiders reveal that domestic property developers only own a quarter of the capital they need. The rest comes from bank loans and homebuyers' down payments.

Developers have taken a hit from the tightening credit from banks starting the second half of last year, and the continuous increase of banks' reserve ratios, which have hit a record high of 17.5 percent.

The lack of capital has reduced developers' will to acquire land. In Shenzhen, 4 out of 5 pieces of land for residential property use failed to be bought at auction in April. And the price of the only lucky one to be bought was at a level not seen since 2006.

Growth in urban land prices in the first quarter was lower than the previous quarter, with some cities even seeing decreasing land prices.