In the first quarter of this year, local authorities in China saw a 24.4% year-on-year decrease in land transfer revenue, a significant drop compared to the same period and full-year land sales revenue in 2025. Industry insiders believe that due to the continued sluggish real estate market, the decrease in land sales revenue for local authorities is inevitable, and the old practice of relying on land sales revenue to increase fiscal expenditures is no longer feasible.
According to data released by the Chinese Ministry of Finance, in the first quarter of this year, revenue from the transfer of state-owned land use rights (land sales revenue) for local authorities amounted to 517.6 billion yuan, a decrease of 24.4% compared to the previous year. This decline is more pronounced compared to the 15.9% drop in the same period last year and the 14.7% drop for the entire previous year.
In China, land sales revenue is an important source of local government revenue. According to a report by “First Finance” on April 27, local government land sales revenue reached a historical peak of about 8.7 trillion yuan in 2021. However, as the Chinese real estate market continues to slump, both the volume and price of land sales revenue have declined, with land sales revenue falling to around 4.2 trillion yuan in 2025, and this downward trend in land sales revenue has persisted into 2026.
The main reason for the continuous decline in land sales revenue, as stated by “First Finance,” is the sustained sluggishness of the real estate market, leading to reluctance among real estate companies to acquire land due to low willingness. Data from the National Bureau of Statistics of the Communist Party of China shows that in the first quarter of this year, nationwide real estate development investment fell by 11.2% year-on-year, new commercial housing sales area decreased by 10.4% year-on-year, and the funds invested by real estate development enterprises dropped by 17.3% year-on-year. In March, the sales prices of new commercial residential buildings in first-tier, second-tier, and third-tier cities decreased by 2.2%, 3.3%, and 4% respectively.
Yan Yuejin, Deputy Director of the Shanghai E-House Real Estate Research Institute, believes that the decline in land sales revenue in the first quarter of this year more reflects the lackluster transaction situation in the land market at the end of 2025. Based on the statistics from major institutions, significant declines in land transaction data have been observed across the industry in the first quarter, indicating the urgency for the land market to stabilize.
Yan Yuejin predicts that the land transfer revenue for the whole year of this year may experience a decrease of around 5% compared to last year.
Ro Zhiheng, Chief Economist of Yuekai Securities, also believes that it may be difficult to reverse the negative growth trend in the land market in 2026.
Due to the impact of the decreasing land sales revenue, fiscal revenues of local authorities in many regions have also declined. In the first quarter, government fund revenues in Inner Mongolia dropped by 32% year-on-year, while in Hainan, the decrease was 29.6%.
Professor Li Rong from the School of Finance and Economics at Renmin University of China stated at an academic seminar on the fiscal operation analysis of China in the first quarter that the significant drop in land transfer revenue reflects the considerable fiscal pressure still faced by local authorities. The previous model of relying on land finance to increase investments for stable growth is no longer suitable for the current economic situation in local governments.