Skip to content

Bidding frenzy pushes price of residential property land to new high in China

In the latest bidding frenzy a new record was set for a 114,517 square meter plot in Shanghai when state owned China State Construction Property Company bought it for $545 million, some 217% more than the asking price.

With the Chinese government committed to trying to cool the country’s over heated property market there was a frenzied interest in the piece of land with all the major players bidding including Greenland, China Overseas Property, China Resources Land, Vanke and Gemdale.

This was despite the government’s new tougher property sales rules requiring buyers to put down at least 50% and pay off the outstanding amount within a year that come into force on January 1.

‘In order to  complete land purchases before the rule takes effect many property developers have decided to buy more land which is making prices soar even further,’ said Chen Sheng, an expert from the China Index Academy, a property research organization.

Such high prices are a reflection of the confidence developers have in the real estate market for 2010.

Even the cooling measures will make them more eager rather than dampening demand, Chen said.

Although there will be price fluctuations next year, they do believe the market is bullish," he said.

He pointed out that current government plans include the building of 1.8 million low rent apartments and 1.3 million state subsidized apartments in 2010 and that will make land harder to find.

Xue Jianxiong, an analyst with E-House (China) Holding, said rocketing land prices indicate housing in the area may have to exceed $7,321 per square meters to be profitable and the price surge will eventually affect neighbouring areas.

‘As we have seen, the central government is working to take the steam out of the over-heated housing market. At this very juncture, developers and investors must take risks into consideration,’ Xue said.

Meanwhile the southern Chinese city of Shenzhen is looking at various measures to restrain speculation in its real estate market.

The city also plans to increase the supply of homes.