Land Transaction Revenue Falls to Six-Year Low
State-owned land sales revenue fell 31.5 percent year on year in the first half of 2026, the steepest decline since the current property market correction began, according to data published in mid-July 2026. The collapse in land transaction revenue has significantly squeezed local government finances, creating a fiscal gap that central transfers and bond issuance have only partially bridged.
Revenue Gap and Fiscal Pressure
| Indicator | Data |
|---|---|
| State land sales revenue change (H1 2026) | -31.5% YoY |
| Central transfers to local governments (H1 2026) | >10 trillion yuan |
| Transfer budget disbursed by June | 90.3% |
| Local fiscal self-sufficiency rate | Below 100% (structural gap) |
| Local government hidden debt refinancing | Ongoing nationwide program |
Why Developers Are Holding Back
Despite government efforts to stabilize the property market—including white-list financing mechanisms, purchase restriction relaxations, and lower mortgage rates—developers remain highly cautious about acquiring new land. With unsold housing inventory still elevated and buyer confidence fragile, land banking is considered too risky. State-owned developers are the most active buyers in the current environment, while private developers have largely withdrawn from land auctions.
Tax Revenue Hit from Property Downturn
The property sector correction is compressing multiple revenue streams for local governments. Land-value-added taxes, deed taxes, and corporate income taxes on property developers have all declined in tandem with land transaction volumes. These land-related taxes traditionally contribute 30–40 percent of local government tax revenue in many provinces, and the sustained decline is widening structural fiscal gaps.
Outlook
Authorities are pursuing multiple fiscal countermeasures: accelerating local government bond issuance, refinancing existing hidden debt, and piloting new land sale mechanisms including sale-upon-completion models in select cities. Early signs of improvement have emerged in certain tier-1 city land auctions, though a broader recovery in land transaction revenue is contingent on stabilization of housing sales and developer balance sheets—a process expected to extend into 2027.
Source: Ministry of Finance of China, July 2026; National Bureau of Statistics; Caixin.