The exterior of a building with so-called youth apartments by Chinese developer China Vanke is seen in Shenzhen, China April 26, 2017. Photo: Reuters/Bobby Yip

In the Middle Kingdom, real estate sales are slowing as efforts to let some steam out of the overheating market bite. Yet the high-stakes game of land bidding by developers is only entering high noon, so long as the banks are behind them, it seems.

Property sales in the first four months may have climbed 20.1% from a year earlier to 3.32 trillion yuan (US$481 billion), but that was still a hefty five-percentage-point deceleration from the first quarter. The downtrend runs parallel to the quantity of floor space sold.

Developers don’t appear to have noticed. Instead, they have grown even more aggressive in chasing scarce land supplies: the average cost per unit of land purchased during April is almost 20% more than in the first quarter.

Total land premiums paid by developers during April reached 74.5 billion yuan, almost 85% more than the 40 billion yuan paid a year ago. That brings the year-to-date sum to 210.4 billion yuan, or a 34.2% increase on the year – which is the biggest rise since the previous high of 33.9% at the end of 2013.

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The gross area of land bought by developers during the first four months has reached 55.28 million square meters, which is a modest gain of 8.1% year-on-year, though an acceleration from the first quarter’s 5.7%.

So how are developers finding the money to fuel their land buying craze? The latest data showed that the overall funding situation remained steady on balance, led by particularly strong domestic bank loans that helped to offset a reduction in down-payments and individual mortgages that was clearly attributable to more restrained residential sales.

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Banks supplied 877.4 billion yuan of loans to developers during the first four months, up 17% year-on-year and following a gain of 10.7% during January-March. Interestingly, the acceleration of developer loans coincided with the larger overall loan figure for April.

Despite slower homes sales, the sector continues to make decent progress in cutting back on empty apartments as per Beijing’s orders. The level of unsold real estate inventory ended April at 674.7 million square meters, down 13.4 million sq m or nearly 2% since the end of March. Almost 97% of the reduction in inventory came from the residential sector.

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