First-tier cities have intensively lowered the floor area ratio of land parcels for transfer, green-lighting land sales.

Since the beginning of this year, Beijing has intensively lowered the floor area ratio (FAR) of residential land parcels put up for auction.

As of June 1st, the Beijing Municipal Planning and Natural Resources Commission has listed a total of 21 residential land parcels this year (18 have been sold, and 3 are scheduled for auction in June). Among them, the FAR of 5 land parcels was reduced during the auction process, accounting for about a quarter of the total.

There are many popular residential land parcels among these. For example, Poly Group won the bid for the Plot FT00 - 0608 - 0001 in Area A of the Taipingqiao Urban Village Reconstruction Project in Fengtai District with 4.1544 billion yuan. The winning bid premium rate was 15.4%, making it the residential land with the second - highest premium this year.

When this land parcel entered the pre - application stage on April 14th, its planned above - ground construction area was adjusted from the initial 86,500 square meters to 72,100 square meters. The FAR was lowered from 2.4 to 2.0.

The land parcel with the largest adjustment this year is the No. 43 Shantytown Reconstruction Land Parcel in Huangzhuang Village, Shijingshan District, which was sold on May 28th. When this land parcel was first listed in 2024, the FAR was 2.55, the starting total price was 4.243 billion yuan, and it came with a sales guidance price of 82,000 yuan per square meter. The indicators were strict and the total price was too high, severely squeezing the profit margin of real - estate enterprises. Eventually, it was withdrawn from the auction due to no bidders. After it re - entered the market in 2026, it was comprehensively relaxed: The FAR was reduced to 2.15, and the construction area was reduced from 84,900 square meters to 72,300 square meters, and the starting total price was significantly reduced to 2.2 billion yuan.

The intensive reduction of the FAR of residential land parcels is not only happening in Beijing. On May 29th, the Plot in the Middle Second Area of Pazhou in Guangzhou was officially listed for auction. The total construction area is 22,700 square meters, the starting price is 940 million yuan, and the FAR is capped at 2.5. When this land was first included in the land supply plan, the FAR was as high as 4.1.

Due to the large stock of old - city renovation projects in Guangzhou, there are many historically - high - density land parcels, and the overall benchmark FAR is higher than that of Beijing and Shanghai. According to statistics, in 2020, the average FAR of residential land in Guangzhou was as high as 3.05. The FAR of the Baihedong Land Parcel in Liwan District was as high as 7.5, and the FAR of the Yuexiu South Land Parcel in Yuexiu District was as high as 6.0. High - density old - city renovation land parcels were the mainstream in the market at that time.

However, after 2024, "FAR reduction" has also become a new trend in the Guangzhou land market. According to the statistics of the Guangzhou Real Estate Industry Association, in the land supply of Guangzhou in 2025, the proportion of land parcels with a FAR between 2.0 and 3.0 increased significantly by 15 percentage points compared with last year, the proportion of residential land parcels with a FAR over 3.0 decreased significantly, and high - FAR land parcels are almost extinct.

For example, the FAR of the Guangzhou Passenger Station Land Parcel in Yuexiu District was halved from the original 7.5 to 4.0, a decrease of up to 47%. The development volume of high - rise buildings was significantly compressed. The FAR reduction of peripheral land parcels is even more obvious. The FAR of the Land Parcel North of Nansha Civic Square decreased from the original planned 6.36 to 2.3, which is equivalent to "cutting off" more than half of the building height.

A few years ago, it was rare for core residential land in first - tier cities to actively reduce the FAR. At that time, core land parcels generally pursued high FAR and large - scale development, and low - density residential land was almost a "rare" and scarce resource. However, now, reducing the FAR is no longer a temporary measure in individual cities. Instead, it is a normalized land - supply measure implemented nationwide, led by first - tier cities and more aggressively by second - tier cities. Low - density land parcels, which were once hard to come by, are now returning in batches.

According to the statistical data of CRIC and E - House Research Institute , from 2016 to 2026, the FAR of residential land in 25 major cities across the country has been continuously decreasing. The industry average FAR has dropped from 2.32 to 1.84 in the first quarter of this year, a cumulative decrease of up to 20.7% over ten years.

In the first quarter of 2026, the proportion of land parcels with a FAR below 2.0 (excluding 2.0) in the sold land reached 49%, an increase of 8 percentage points compared with the same period last year; the proportion of land parcels with a FAR below 1.5 (excluding 1.5) was 24%, an increase of 5 percentage points; the proportion of land parcels with a FAR below 1.2 (excluding 1.2) was 11%, an increase of 1 percentage point (data from E - House Research Institute).

Low - density land supply has become a long - term trend in changing the supply structure of the residential market, and first - tier cities with tight land supply are no exception.

Taking Beijing as an example, as of now, among the 18 residential land parcels sold in Beijing this year, only 5 have a FAR above 2.0, and only 1 has a FAR of 2.5. The proportion of land parcels with a FAR of 2.0 or below is over 70%.

The same is true for Shanghai, which is a barometer of the real - estate market. According to Haodi Big Data, the average FAR of residential land sold in Shanghai in 2025 was 1.96, 0.14 lower than that in 2024 (2.1) and 0.39 lower than that in 2023 (2.35). In the first quarter of 2026, the FAR continued to decrease to 1.62.

The FAR has a decisive impact on the form of residential buildings. Generally speaking, the FAR of single - family villas is between 0.2 - 0.5, that of townhouses is usually between 0.4 - 0.7, that of stacked villas is 0.8 - 1.2, and that of garden apartments is 1.5 - 2.0.

With the overall reduction of the FAR, the average FAR in first - tier cities tends to drop below 2.0, which means that the once "popular" super - high - rise buildings will completely withdraw from the market. In the future, garden apartments and small - high - rise buildings will dominate the market supply.

This large - scale reduction of the FAR caters to the policy orientation of upgrading the living environment and building high - quality residential buildings. At the same time, the way of "reducing the FAR and giving benefits" has also green - lighted the land auction and the smooth sales of new residential projects in the market.

Since 2024, all the core high - quality land parcels sold at a premium in Beijing, Shanghai, and Guangzhou are low - density land parcels with a FAR below 2.5 after the FAR adjustment. High - density land parcels have basically disappeared from the premium market.

In addition to reducing the FAR to "slim down", some land parcels have also optimized the auction indicators to "improve the quality", including but not limited to reducing the proportion of inefficient commercial facilities, increasing public facilities, relaxing the building height limit and other optimization measures to comprehensively lower the development threshold for real - estate enterprises and pave the way for the smooth auction of land.

These series of actions have also maintained a certain level of liquidity in the land market and the new - housing market in major cities across the country, keeping them above the safety line.

The reduction of the FAR of residential land objectively unbinds and reduces the burden on real - estate enterprises. Land parcels with a low FAR, small building scale, and good location have become "hot items" in the eyes of real - estate enterprises. These land parcels are easy to develop into differentiated products and require relatively less start - up capital.

It is worth noting that the large - scale reduction of the FAR of residential land and the large - scale entry of low - density land parcels into the market have accelerated the iteration of real - estate products. The most intuitive impact is that the generational gap between new houses and existing old houses has been completely widened, and the real - estate market has officially entered the "quality - stratified era".

Most of the first - tier commercial housing built before 2020 was developed on high - FAR land parcels, with dense buildings, cramped public spaces, and serious homogenization of house types. These products are gradually entering the second - hand housing market, and the generational gap between them and new products is directly reflected in the market value. It has become normal for these newly - built second - hand houses to break the issue price upon delivery.

The second - hand housing market has become a "buffer zone" for digesting "old products" by reducing prices to gain liquidity. This is also one of the reasons why the transaction volume of second - hand houses in first - tier cities has rebounded since this spring, but the price stabilization has been delayed.

The trend of the land market is always the most real barometer of the real - estate market. With the normalization of low - density land supply, the real - estate market in first - tier cities has completely bid farewell to the extensive era of high - density and rapid turnover, and the products of real - estate enterprises have entered a state of "a hundred flowers blooming". When these new products flow into the second - hand housing market in a few years, the "old houses" will also be forced to undergo a re - evaluation of their value.

This article is from the WeChat official account "Future Livable", author: Xiaowu Jiandawu. Republished by 36Kr with permission.