The land market's first quarter "control of new additions" and "optimized supply" measures are being implemented in an orderly manner.

Wang Lixin

This year’s Government Work Report proposed, “Focus on stabilizing the real estate market,” and “apply policies tailored to each city to control incremental supply, reduce inventory, and ensure supply.” Based on the latest data, in the first quarter of 2026, the national land market delivered an answer sheet of “reduced total volume, optimized structure.”

According to data from the China Index Academy, in the first quarter of 2026, the transaction area of residential land across 300 cities and the land transfer premiums both fell year over year by 24% and 42%, respectively. The author believes that, against the backdrop of changes in the supply-demand relationship in the real estate market and the steady advancement of inventory reduction, this set of data is not a signal of a weakening market; instead, it confirms that the policy approach of “controlling incremental supply and improving supply” is being implemented precisely and in an orderly manner. The core logic is “control total volume, improve quality, and manage inventory,” pushing the industry to accelerate its shift from scale expansion to high-quality development.

The “increment control” orientation is clear, and the land market is shifting to “supply based on actual demand.”

In the first quarter, the decline in residential land transaction scale is attributable to multiple factors. In many places, the regulatory approach of “apply policies tailored to each city to control incremental supply, reduce inventory, and ensure supply” has been in execution for a long time. Meanwhile, in mid-March, the “Notice on Further Doing a Good Job in Supporting Natural Resource Element Supply,” jointly issued by the Ministry of Natural Resources and the National Forestry and Grassland Administration, made it clear that it is necessary to establish and improve a mechanism linking the revitalization of newly added construction land with the revitalization of existing construction land. As a general rule, annual newly added urban and rural construction land must not exceed the area of existing inventory land that is revitalized. This policy follows the principle of “revitalize inventory first, supply based on actual demand, and prioritize inventory.” It reduces the supply of newly added construction land and ends the development model that previously relied on incremental expansion. In addition, some cities are exploring a more precise land-supply model of “supply based on actual demand,” supporting the recovery of existing inventory land through special-purpose bonds.

From the market perspective, “increment control” is not a one-size-fits-all measure. Core cities such as Beijing and Hangzhou have proactively reduced their land-supply plans. In the first quarter, Hangzhou only auctioned three residential land plots. Cities including Chengdu and Xiamen determine the supply volume by “allocation timing of inventory reduction,” ensuring that land supply precisely matches market demand. This kind of operation—“set supply based on sales, reduce volume to stabilize prices”—effectively alleviates the pressure from high real estate inventory levels and creates a more favorable environment for companies to speed up cash collection. Behind this series of changes is the land market moving away from “flood irrigation with massive liquidity” toward a balanced supply-demand stage of “precise drip irrigation.”

“Improving supply” shows early results, with high-quality plots drawing strong interest.

In sharp contrast to the overall reduced land supply volume, core cities have seen a “localized surge in heat” for high-quality plots, making plot bidding differentiation the most distinctive feature of the land market in the first quarter. For example, the Ma’chang plot in Guangzhou Zhujiang New Town underwent 243 rounds of bidding before selling for 23.6 billion yuan, which translates to a residential floor-area transaction land price of 85.49k yuan per square meter, setting a new record for the unit residential land price (per floor area) in Guangzhou. In Shanghai and Hangzhou, premium rates for plots in core areas have repeatedly exceeded 10%. Hot cities’ high-quality plots have attracted a cluster of central SOEs, state-owned enterprises, and high-quality private enterprises to compete in bidding.

This differentiation is a direct manifestation of “improving supply.” The focus of land supply shifts toward core areas, along rail lines, and plots with mature supporting facilities. Key cities prioritize supplying land for “better housing,” increasing the supply of improved residential plots with higher value for money. At the same time, inventory revitalization is one of the major supply channels; redevelopment of low-efficiency uses and urban renewal have become new channels for land supply. High-quality plots, leveraging their advantages of “low risk and high certainty,” have become real estate developers’ “preferred safe haven,” and they also help the land market shift from “competing on scale” to “competing on quality.”

“Cautious” is the investment benchmark for developers; safety is the primary consideration.

At present, the overall market is still in a “focus on stabilization” phase, and developers remain cautious about investment. From the perspective of corporate investment logic, the situation generally shows the following characteristics: first, they place greater importance on the “cash-flow return positive cycle”; ensuring funding safety and project inventory absorption becomes the primary consideration for investment. They prioritize small-scale, fast-absorbing, low-total-price plots. Second, most enterprises choose to deepen their efforts in cities where they already have a presence. Third, financially sound high-quality private enterprises, on the premise of safeguarding the bottom line of funding safety, precisely seize structural investment opportunities. Fourth, central SOEs and high-quality local state-owned enterprises, benefiting from financing advantages, continue to deepen their presence in first- and second-tier core cities, and tend to invest in improvement-focused plots to raise profit margins. Fifth, some enterprises reduce investment risk through models such as joint development.

Overall, in the first quarter, “controlling quantity and improving quality” in the land market lays the foundation for the stable operation of the real estate market in 2026. As inventory revitalization deepens, high-quality supply is released, and policy effects continue to become more apparent, the real estate market will see more development certainty. The industry will accelerate its transition toward high-quality, sustainable directions, moving into a new cycle of “integrating renting and buying, prioritizing inventory, and quality as paramount.”

(Editor: Wen Jing)

Keywords:

                                                            Land