2026 Budget Draft Interpretation: "Second Account" Target Revenue Remains Flat, Will the Land Market Reach an Inflection Point?

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Reporter Wang Zhen

The 2026 central and local budget draft reports show that this year's local government special fund budget revenue target is 52.644 trillion yuan, roughly the same as last year. The largest component of local government special fund revenue is land transfer income from state-owned land use rights, accounting for nearly 80%.

In China's fiscal budget system, government special funds are also called "second books," ranking after the general public budget. Their income comes from specific fees or funds (such as land transfer fees, civil aviation development funds, etc.). These funds are the main source of financing for large-scale infrastructure projects and urban expansion by local governments. Due to recent adjustments in the real estate market, land transfer income has declined, increasing the pressure on the revenue and expenditure of government special funds.

This year, the local government special fund revenue target remains flat compared to last year. Does this mean the land market will recover? Analysts say that land transfer income may still face downward pressure in 2026, but supported by factors such as stock of existing commercial housing, relaxed purchase restrictions, and improved financing environment for developers, the decline in land transfer income is expected to narrow.

In 2025, land transfer income from state-owned land use rights was 4.1518 trillion yuan, down 14.7% from the previous year, marking four consecutive years of decline, but the rate of decline narrowed by 1.3 percentage points compared to 2024.

Data source: Ministry of Finance    Chart: Jiemian News

"By 2025, the bottom price of land transfers has stabilized. If the bottom price remains the same in 2026, forecast models estimate that land transfer income will be about 3.8 trillion yuan, a year-on-year decrease of 8.1%, with the decline narrowing by 6.6 percentage points," said Yuan Haixia, Director of the China Chengxin International Research Institute, to Jiemian News.

Nomura China’s Chief Economist Lu Ting told Jiemian News that the local government special fund revenue in 2025 is expected to decrease by 8.2% compared to last year, much lower than the 0.1% growth target set in the March budget draft. Given the uncertain recovery of the real estate market and weak developer land acquisition willingness, land transfer income is expected to continue declining in 2026.

"Data from January-February this year shows that the sales of top 100 real estate companies' commercial housing decreased by about 30% year-on-year, indicating that the real estate market has not yet achieved a true stabilization and recovery, even though prices have been significantly adjusted from their peak," Lu Ting said.

According to statistics from Jiemian News, as of now, 27 provinces have announced their 2025 land sale revenues, with only 5 provinces showing growth, while the rest declined compared to last year, with many drops exceeding 10%. Additionally, among the four provinces (Shanxi, Inner Mongolia, Liaoning, Tibet) that have not disclosed land sale revenue, at least one (Inner Mongolia) reported a decrease last year.

Data source: Local 2025 budget execution reports    Chart: Jiemian News

The five provinces that saw growth in land sale revenue last year are Gansu, Yunnan, Xinjiang, Heilongjiang, and Ningxia. Yunnan's land sale revenue surged 15.9% year-on-year, leading nationwide; Gansu increased by 8.6%, Ningxia by 3.5%. However, these provinces' land sale revenues are generally low, all below 100 billion yuan.

Among the provinces that have reported land sale revenue, 13 experienced declines greater than the national average, including several major eastern economic provinces.

Guangdong's budget report shows that in 2025, land transfer income was 241.581 billion yuan, down 11%. Looking ahead to 2026, Guangdong states that the foundation for stabilizing the real estate market is not yet solid, and fiscal revenue growth faces significant pressure.

Shandong's budget report indicates that in 2025, land transfer income was 325.836 billion yuan, down 18%, mainly due to reduced land transaction volume amid real estate market adjustments.

Furthermore, Jiangsu's budget report shows that in 2025, land transfer income was 558.893 billion yuan, down 23.1%. Jiangsu also notes ongoing deep-seated difficulties and challenges in fiscal operations, including a significant decline in land transfer revenue.

According to Jiemian News, 25 provinces have announced their 2025 land sale revenue and 2026 budget targets, with 16 provinces expecting land sale revenue to exceed last year. Among them, Heilongjiang is most optimistic, projecting a 42.8% increase this year, followed by Anhui with a 28.3% increase.

Data source: Local 2026 budget reports    Chart: Jiemian News

This year's government work report emphasizes "stabilizing the real estate market." Compared to last year's statement of "continuously promoting a stabilization and recovery," the wording is more concise but reflects a deeper and upgraded policy goal.

Specifically, the report mentions measures such as: city-specific policies to control new supply, destock, optimize supply, explore multiple channels to activate stock housing, encourage acquisition of existing commercial housing mainly for affordable housing, deepen housing provident fund reform, optimize affordable housing supply, accelerate renovation of old and dilapidated housing, promote the construction of safe, comfortable, green, smart homes, implement quality improvement projects, and enhance property management services. It also emphasizes the role of the "guaranteed delivery" whitelist system to prevent debt default risks.

Zhongyuan Real Estate Chief Analyst Zhang Dawei told Jiemian News that "stability" is the core goal of current real estate regulation. This is not stagnation but a sustainable operation based on clearing risks, restoring expectations, and optimizing structure, aiming to achieve multiple goals: "stabilizing expectations, stabilizing investment, promoting consumption, and ensuring people's livelihoods."

He further explained that this involves three implications: first, shifting from purely demand-side stimulation to coordinated supply and demand, strengthening supply-side reform; second, moving from incremental expansion to activating stock, closely linked to affordable housing construction and urban renewal; third, transitioning from short-term administrative intervention to long-term institutional development, incorporating risk prevention and livelihood protection into the rule of law, moving from "cyclical responses" to "strategic restructuring."

Lu Ting said that currently, from top leadership to the market, the approach to solving real estate issues is becoming clearer, and all parties are increasingly aware of the impact of the sector's downturn on the overall economy. An important article on stabilizing and improving real estate expectations was published in the January 1, 2026 issue of Qiushi magazine, emphasizing key points: 1) reaffirming that real estate remains an important part of the national economy and clarifying some misconceptions; 2) emphasizing the financial attributes of real estate; 3) highlighting real estate as a significant component of residents' wealth; 4) analyzing the negative impact of the sector's decline on nationwide debt accumulation. Due to its long-term high financial attribute, the downturn has generated huge debts, many of which have not been effectively resolved in recent years. Clarifying the importance of the sector, ongoing demand, and unresolved issues is crucial for advancing solutions.

Lu Ting concluded that overall, the adjustment of the real estate industry has entered its sixth year, with signs of positive change gradually emerging. The probability of true stabilization and recovery in the next 2-3 years remains high. However, he emphasizes that achieving this depends on substantial progress in debt resolution for the sector, especially for developers.

		
		
		

		

		
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