Land hoarding could drive up prices, as demand rises

Land hoarding by real estate developers is becoming a serious problem that could push up already soaring home prices, industry analysts said Monday.

From 2003 to 2009, 40 real estate companies acquired 270 pieces of land in 12 major cities. Excluding land that is currently on sale and already purchased, 57 percent of the properties have yet to be used for commercial housing, and some 27 percent awaits development, according to Xu Heng, an analyst with the China Index Academy, a real estate research institute.

Some pieces of land have stayed unused for four to five years, said Liu Weixin, vice president of the China Society of Urban Economy.

Many residential property developers hoard land to resell it later at a higher price, Liu said.

A piece of land that is located in one of Beijing's most exclusive areas was purchased by Hong Kong's PCCW, a telecommunications provider which also has investment in real estate, CCTV's "Half-hour Economy" program reported over the weekend.

PCCW's chairman is Richard Li Tzar Kai, the son of Li Ka-shing, Asia's richest person.

PCCW bought the land for 510 million yuan ($74.68 million) in early 2006. The land had stayed unused until it was resold to another Hong Kong company in August. After over three and a half years as a vacant lot, the land was sold for around $118 million, according to CCTV.

PCCW earned about HK$235 million ($30.32 million) before tax from this deal, CCTV reported.

If many real estate developers hoard land, homes will be in short supply, thereby boosting prices, Xu said.

The number of unsold homes in Beijing has plunged below 100,000 as of the end of September.

This can only satisfy demand for five months, according to a blue paper on the country's real estate industry released October 15 by the China Minsheng Banking Corp.

Analysts noted that the government is not dealing with the land hoarding effectively, however.

Though there are rules that allow the government to confiscate land which is unused for more than two years, the country has seen little application of these rules, said Liu.

"It's time for the government to take realistic measures to curb the land hoarding. It's useless to enact regulations while never implementing them."

Companies don't buy land to build houses. They do so to put the land in reserve to gain financing, Xu said.