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Soaring land prices were once considered the major factor for the high housing prices in China. But this year, developer sentiment has been dampened by the government's curbing policies. Experts believe the drop in land prices is one of the key reasons for falling housing prices.
Liu Hongyu, Director of Inst. of Real Estate Studies, Tsinghua University said "The most obvious effect of the government's policies is on the transaction volume, and the falling volume will greatly affect developers' capital chain. Under such circumstances, they will be very careful when bidding on land. Local governments have increased land supply recently, but the developers' enthusiasm is cooling compared to last year. The main reason is the capital chain."
Gu Yunchang, Deputy Director of China Real Estate & Housing Research Association said "Prices for some land are far lower than before the policies were implemented, and developers are no longer constantly buying up land. Houses are left unsold, the market remains uncertain and there's also the tight capital chain... it's a gamble right now."