1st LD-Writethru-China Focus: China restricts land supply amid property downturn

Chinese land and housing authorities announced measures to regulate land supply for residential buildings on Friday over concerns of a glut in home supply.

In cities or counties with excessive home inventories, local governments should "significantly" reduce or halt land supply, according to measures jointly rolled out by the Ministry of Land and Resources and the Ministry of Housing and Urban-Rural Development.

Meanwhile, in cities where there are not enough homes to meet demand, land supply should be increased based on market principles, the measures said.

They did not specify a unified standard to gauge oversupply, instead they are expected to be established by the regions themselves as they are required by the ministries to draw up their land supply plans for 2015.

Decisions on land supply plans by municipal or county-level governments will be guided and supervised by provincial governments; they should be based on home surveys, demand projections, and the scale of homes available for sales while taking into consideration resources, environment and population, according to the new regulations.

Local governments have relied heavily on land sales for fiscal income, a phenomenon which analysts say entails risks to the economy once the property market cools. It is also unsustainable, given lands are limited. A Deutsche Bank report in January estimated that land sales account for 35 percent of total local government revenues in China.

The measures are in line with the cabinet's guidelines on differentiated control of the property market among regions, a statement released on Friday by the two ministries said.

"The measures aim to reasonably optimize the scale and structure of land supply... and promote the property sector's stable and healthy development," the statement said.

According to the new regulations, in regions where there is oversupply, local land departments may transform undeveloped residential lands for other purposes, such as for venues of state-championed industries, elder care facilities as well as cultural and sports facilities.

In order to meet the living demands of middle and low-income groups, local governments may also transform commercial residential homes into relocation homes or government-sponsored homes for rentals.

China's property sector took a downturn in 2014 after boom years that saw home prices rocket to levels out of reach for common wage earners. The cooling trend has continued, with both sales and prices falling, and investment slowing.

According to an official survey of 70 cities, new home prices dipped in 66 of the cities on a monthly basis in February. On a year-on-year basis, the prices dipped in 69 of the cities. Endi