For the first time in three years lands plots up for auction in Beijing went unsold last week, signaling that developers are nervous about ongoing weakness in the country's property market.
Two of the five lots put up for sale by the Beijing government last week received no bids – for the first time since April 2011, according to Chinese media reports. In another auction on Monday, two of four lots were sold to developers at lower-than-expected prices.
According to Ryan Huang, strategist at IG's Singapore office, the unsold auctions suggest "a mismatch between what increasingly cautious developers are willing to pay versus what local governments want."
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Local governments in China rely on land sales for the bulk of their revenue and are unwilling to budge on high prices, but developers are seeking lower prices as they have become less cash rich due to recent price declines and a tightening credit market.
And Huang said he didn't see this trend letting up anytime soon.
"We're likely to see the relatively muted appetite by property developers continue, as investors get increasingly concerned over a property slump and take a wait-and-see attitude," added Huang.
Du Jinsong, head of Asia Property Research at Credit Suisse, told CNBC the unsold auctions were result of local government's misjudging the market.
"Developers have adjusted their expectations on future housing prices already, given the housing market weakness for the past six months, but local governments have not yet adjusted their own expectations so some land parcels' open bid prices (base prices) were set too high," he added.
The current situation marks a stark contrast to the same time last year, when major Chinese developers were nicknamed the 'land kings' due to their aggressive bids.
But the Chinese property market is markedly different today. Prices have been correcting since late last year, as government steps to cool frothy prices have taken effect.
Housing prices fell for a third straight month in July, data from the China Real Estate Index showed. Average new home prices in the 100 Chinese cities surveyed fell 0.8 percent compared to the previous month, sharper than June's 0.5 percent on-month decline.