(Yicai Global) May 8 -- Land auctions in large Chinese cities were accelerating recovery in April but smaller cities are still struggling with sluggish demand as property developers are getting risk-averse amid a patchy housing sales rebound.

Land price premiums remained relatively high at 7.2 percent nationwide last month, according to the latest data from the China Real Estate Information. Only 11 percent of plots failed to be sold, the third-lowest share since the second half of 2022.

Property firms will prioritize investment safety as housing sales in some cities failed to recover last month, according to Zhang Kai, head of land market research at the China Index Academy. This will make developers further target core cities, Zhang added.

A person in charge of eastern China at a large private developer said to Yicai Global the firm has refrained from land auctions in the past 12 months but will finish some investments in the first half. These new projects are set to hit the market in the second half. The company will focus on cities with stronger demand while trying to do a good job in selling and delivering existing projects elsewhere, the source added.

Big Cities Rise First

In the first four months of this year, land markets were hotter than last year in the data set of 22 core cities. Among 19 of the 22, some 44 percent of parcels of land were sold at the highest possible price, a ceiling set by the government, as the share rose from a year ago. Meanwhile, 54 percent of the 19 cities recorded prices higher than the starting price. In comparison, last year only 24 percent of plots were sold at the maximum price and 40 percent of such assets were sold at a premium.

The four leading first-tier cities of Shanghai, Beijing, Shenzhen and Guangzhou are leading the group of hot markets, along with eastern cities Hangzhou, Hefei and Nanjing and western China's Chengdu. Evidently, 73 firms signed up for Shanghai's auction of selling land use rights in April. Nine of the available assets attracted over 10 bidders and one of them even got 28 offers. In Hangzhou, 12 lots were sold in just 50 minutes in the third 2023 auction.

Private property developers once again starting to join state-owned enterprises in auctions. From January to April, four out of the five biggest spenders in Hangzhou were non-SEOs, according to the CIA. Weixing Group and Kunhe Construction Group, two out of the four, splurged CNY7.8 billion (USD1.1 billion) and CNY7.5 billion, respectively.

However, some lower-tier cities are lagging behind in recovery. Jinan, the capital of eastern China's Shandong province, failed to auction off four of the 16 available lots recently, and the remainder was sold at bottom prices. Moreover, Zhengzhou, the capital of central China's Henan, and Changchun, the capital of northeastern Jilin province, have recently been auctioning off assets at the lowest prices.

Editors: Tang Shihua, Emmi Laine, Xiao Yi