China’s state-backed developers are increasingly acquiring land at higher prices as the government loosens home price restrictions to rejuvenate the property market. In 2025, 37% of land deals sold for at least 20% above the asking price, a rise from 14% in 2024 and 4.6% in 2023, as per China Index Academy.

Despite weak home sales and prices, this surge in land purchasing indicates a growing confidence in future market recovery. However, land sales volumes still trail behind pre-crisis figures, with many transactions involving smaller parcels.

To counter falling land sale revenues, local governments have eased restrictions. Numerous cities eliminated price caps on new homes last year, enhancing profit margins for developers. In November, Beijing removed home price limits for the first time in three years, with Shanghai and Hangzhou soon following suit.

Despite ongoing market uncertainties, state-owned developers are at the forefront, buoyed by government assurances to stabilise the real estate sector. With beneficial policy changes and renewed competition for prime land, the Chinese property market is exhibiting early signs of recovery.

While property sales remain weak, the steep increase in land acquisition costs paid by state-owned firms suggests that confidence in a market rebound is gathering momentum. The data from China Index Academy makes this clearer—only a small portion of land deals went far above asking prices in previous years, yet more than a third have done so in 2025. This reflects a shift in expectations.

At the same time, overall land sales remain subdued compared to the levels seen before the downturn. While transactions are happening, they often involve smaller plots, meaning developers are being selective rather than aggressively expanding. Still, the fact that these purchases continue at higher prices implies that some firms expect conditions to improve enough to justify paying more today.

Policy shifts are playing a key role. By loosening restrictions on housing prices, officials have given developers a stronger incentive to acquire land. The removal of price caps in cities like Beijing, Shanghai, and Hangzhou directly increases potential profits, which makes land acquisitions more appealing despite ongoing economic challenges. Given the concerns over falling land sale revenues, local governments are prioritising measures that entice firms to return to the market.

State-owned developers are the most active participants. While private firms remain cautious, those backed by the government have moved forward with purchases, likely encouraged by the latest efforts to stabilise real estate. With policy tailwinds in place and demand for prime land heating up, we are witnessing the early effects of these changes.