The current landscape of land reserve policies in China has entered a pivotal stage, particularly with regards to the implementation of special bonds aimed at acquiring idle land supplyIn a recent wave of announcements, cities such as Foshan, Huizhou, Zhuhai, Zhongshan, and Jiangmen have revealed plans to procure a significant amount of land, marking a notable trend in the real estate and urban development sectorsInsights provided by various market institutions suggest that these plans involve over 160 plots of land, spanning a total area exceeding 6.8 million square meters, with a cumulative acquisition price set to surpass 35 billion yuan.

According to Chen Wenjing, the Director of Policy Research at the China Index Academy, the types of land involved in these acquisitions are quite diverseThey include residential, commercial, industrial, and other land classifications, with residential land making up more than half of the planned acquisitionsChen also pointed out that the land parcels earmarked for acquisition were primarily transacted between 2020 and 2024, indicating that over 80% of these deals have occurred within the specified timeframe.

With the policy on special bonds for land reserves poised for a significant rollout toward the end of 2024, local governments are actively compiling data on the scale of idle lands ready for acquisitionCertain regions have already initiated public announcements soliciting contributions for the recovery and purchase of these landsIn this context, numerous cities in Guangdong province have disclosed the first batch of proposed projects and prices for land intended for acquisition through special bonds, marking the transition into a concrete implementation phase.

Early estimates, as reported by the China Index Academy, reveal that as of February 11, 2025, a substantial number of land parcels identified for acquisition exceed 160, alongside land usage measurements of over 6.8 million square metersFoshan and Huizhou lead the way in financial allocations, with Huizhou earmarking over 12 billion yuan for land acquisition— the highest in the list— while Zhuhai follows closely with a planned budget of approximately 6.65 billion yuan.

In an analysis that compares these announcements with transaction data from the China Index database, it becomes clear that there is a balance in pricing

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Most of the land in the announcements will be acquired without any premium; the intended acquisition prices closely mirror their original transaction valuesApproximately 70% of the announced acquisition prices demonstrate a ratio of between 0.8 and 1.0 when measured against the original pricesMoreover, more than 40% of the land falls within a ratio range of 0.9 to 1.0, indicating a strong alignment between acquisition and current market values.

Despite the progress made in several cities, analysts believe there is still room for acceleration in implementing relevant policiesThe acquisition of idle land through special bonds is considered a vital strategy to stimulate the market and guide it into new cyclesChen highlights that the efficacy of these policies can be enhanced by addressing various obstacles to land acquisition.

Currently, the bulk of acquisition targets seems concentrated within local state-owned enterprises, often limiting the enthusiasm of private and other corporate entities in the land acquisition processChen points to a series of challenges that inhibit local governments from engaging more robustly in the market, including unclear special bond quotas, complex adjustment procedures, and difficulties negotiating land swap benefitsThese complications contribute to a lack of motivation among certain local governments to engage actively in these acquisition endeavorsOther hurdles include low acquisition prices and the intricate coordination required between governmental and corporate interests.

To accelerate the pace of land acquisition using special bonds, Chen proposes that establishing starting prices during land auctions could serve as significant references for acquisition pricesMoreover, to maximize the funding benefits, she suggests that the focus of acquisitions should be restricted to idle land available since 2020. Additionally, enhancing support for private enterprises could play an essential role in ensuring that the recovered land can meet effective supply demands.

The overall strategy of acquiring idle and surplus land through special bonds is viewed as a feasible means of improving the market's supply and demand relationships, as well as facilitating a revitalization of the real estate market

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