(Yicai) April 16 -- Most major cities in China plan to scale back the amount of land allocated for residential use this year in response to changing market conditions and an overarching policy directive.

Xi’an intends to cut its total land supply by 15.4 percent this year from last year and slash residential land supply by 22 percent, authorities in the capital of Shaanxi province announced yesterday. The reduction in land for new homes places it roughly in the middle of the 20 big cities that have set out similar plans, Yicai found.

Four cities, including Xi’an, will lower supply by more than 20 percent; four others, including Ningbo, by over 30 percent; and four more, including Dongguan, by more than 40 percent. Yinchuan, in Ningxia Hui Autonomous Region, announced the biggest cut at 61 percent.

The downsizing comes in response to major shifts in supply and demand in the real estate market, Yan Yuejin, deputy director of the Shanghai-based E-House China Research and Development Institute, told Yicai.

It also reflects a government policy directive to “strictly control new additions, optimize existing inventory, and improve quality,” which aims to speed up the absorption of existing land reserves and ensure the completion and sale of projects, Yan added.

Although the supply of new building land is being reduced, that does not mean that there is a shortage of land for residential use, Yan pointed out, adding that there is still ample available for development.

Four cities announced plans to expand residential land supply this year, with Guangzhou, one of China's four first-tier cities, to see the figure grow 21 percent, while Tangshan, Shijiazhuang, and Sanya expect single-digit increases.

The increase in a few cities is likely due to the addition of land in areas where certain projects sell well, which is increasing supply based on market demand, according to Yan.

In the first quarter of the year, many big cities had a surge in popular residential projects in prime locations, driving sales in those markets. Several cities also logged record-high prices paid for land auctioned by local authorities, boosting supply in core areas.

Guangzhou’s new homes sales surged 37 percent in the three months ended March 31 from a year earlier, according to the city’s own data. For pre-owned homes the increase was 26 percent. At the end of last month, the city’s new housing stock had fallen to 10.23 million square meters, a 5.5 percent decrease from Dec. 31, with the absorption period shortening to 14.3 months.

Guangzhou shows that even though the property market is still in a period of adjustment overall, some major cities still have strong market appeal and development potential, Yan said.

Editors: Tang Shihua, Martin Kadiev