(Yicai) June 24 -- Sales of land use rights, a key revenue stream for China’s local governments, fell at a faster rate last month amid the country's property market slump, deepening the decline in the first five months of the year to 14 percent.

From January to May, finance revenue from land transactions dived by about CNY1.28 trillion (USD176.4 billion) from a year ago, according to data released by the finance ministry today. In the first four months of this year, the decline was 10.4 percent.

In the first five months, 26 of 30 regions recorded falling sales. Fifteen regions logged higher than 30 percent decreases, including Guangdong province which reported as high as a 57.5 percent drop while Sichuan province suffered a 42.7 percent decline.

Fiscal revenue is expected to further shrink this year, Luo said. Part of the reason is that policy shifts will take time to show and land use rights are paid in instalments so they are included in the national treasury slowly, the financial expert added.

Based on calculations from January to April, China’s fiscal revenue coming from transfers of land use rights should tally CNY4.7 trillion (USD647.2 billion) through this year, falling by 19 percent from 2023.

Local governments have launched a series of policies in recent months to stabilize the housing market after months of narrowing fiscal revenue due to in-depth adjustments over recent years, property developers’ capital pressures, and residents' cautious attitude toward home-buying. 

The slumps have increased local governments’ dependence on transfer payments from the central government while reducing their ability to build new infrastructure and improve people’s livelihoods while urban investment companies have a harder time getting access to debt financing, said Luo Zhiheng, chief economist at Yuekai Securities.

China should aim to balance out its real estate economy in the short run to ease local governments’ financing conditions, Luo said. Policies targeting the real estate sector should continue to guarantee supply, stimulate demand, and stabilize home prices, the chief economist added.

In the medium to long term, the nation should create new models to boost the healthy development of the property industry, Luo said, adding that in the meantime, it should exploit the role of finance in supporting technological innovation to spur the transformation of industrial structures and to nourish new streams of tax income.

Editor: Emmi Laine