Goldman Sachs: China's Presale System Reform to Cut Land Sale Revenue by 30%
nashnova research
Goldman Sachs raised its forecast for China's land-sale revenue decline from 20% to 30%, matching actual data for the first seven months; the shift from presales to completed-home sales is reshaping local government finances at their foundation.
What exactly is the presale reform changing?
Under the old model, developers sold homes before they were built — buyers paid in full upfront, and developers used that cash to buy more land and start new projects.
The new policy pushes developers toward completed-home sales: buyers put down a small deposit and can walk away if the home is not delivered on time.
This means → developers can no longer "collect first, build later," and their capacity to purchase land shrinks sharply.
How hard does this hit local government revenue?
Goldman economist Wang Lisheng raised the land-sale revenue decline forecast from 20% to 30%, with the pressure expected to last through 2027 or longer.
Ministry of Finance data backs the call: in the first seven months of this year, nationwide land-sale revenue fell 30.8% year-on-year to 1.2 trillion yuan (roughly $179 billion).
In plain terms = local governments once relied on land sales for close to a third of their income — that channel is narrowing fast.
How bad could it get?
Goldman projects that from the mid-2021 peak, land-sale revenue could ultimately fall by as much as 90% on a cumulative basis.
This means → land-based fiscal income is not in a temporary slump — it is undergoing structural contraction, and local governments must find replacement revenue streams.
This reflects a deeper signal: China is deliberately dismantling the "sell land → build → sell more land" cycle, but the cost of dismantling falls squarely on local budgets.
Why push this reform if the cost is so high?
The presale system has long been seen as the root of oversupply and developer debt — developers used presale cash to keep acquiring land and adding leverage.
Years ago, a wave of unfinished projects triggered mass mortgage-payment boycotts by homebuyers, forcing policymakers to cut the cycle at its source.
In plain terms = the reform's logic is "short-term pain for long-term stability" — sacrificing developer cash flow and local land revenue to build a market that no longer runs on presale-driven bubbles.
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