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Land fever continues in Shanghai

LAND fever extended in Shanghai today just like the soaring mercury as a residential parcel 40 kilometers away from People's Square fetched the highest price for a single plot in the city so far this year.


Shanghai-listed Gemdale Corp, one of the country's first real estate developers that went public, beat over 20 rivals when it paid 8.8 billion yuan (US$1.3 billion), or a premium of 286 percent to the reserve price, for the  140,252-square-meter housing parcel in Zhuqiao of Pudong New Area.

The bid was equivalent to about 33,023 yuan per square meter of gross floor area. But the actual GFA price for the saleable area exceeded 41,000 yuan per square meter as only 80 percent of homes built on the site could be released to the open market under government requirements.

"Just a few kilometers away from the Shanghai Pudong International Airport, this plot was the most expensive land piece sold in Shanghai so far this year in terms of overall price," said Lu Qilin, director of research at Shanghai Homelink Real Estate Agency Co. "Home to the general assembly base of Commercial Aircraft Corp of China, Zhuqiao is seeing great prospects for future development as a large number of talented people from all around the country would be attracted to settle down in the area as the domestic commercial aviation industry soars but that would take quite some time."

Despite a promising future, today's land price was still very high as it was almost a triple from that of residential plots sold in the neighborhood some two and a half years ago.

Back in January 2014, three housing plots in Zhuqiao were sold to two domestic developers for an average GFA price of a little above 11,000 yuan per square meter, each with a premium of around 90 percent, according to Homelink data.

Based on its actual GFA price, new homes built on this site should exceed 50,000 yuan per square meter or the developer won't be able to break even, industry analysts said.

"Compared to many of its rivals who have been very aggressive in land bank expansions, Gemdale has only acquired three land parcels -- one of them in first-tier cities -- so far this year and that could probably explain the high price it agreed to pay for the Zhuqiao plot," said Lu Wenxi, senior manager of research at Shanghai Centaline Property Consultants Co. "The land piece is not yet accessible by metro lines while infrastructure in the area is not so mature either and which will jointly make it a big challenge for the developer."

Only a few projects in the neighborhood are currently available for sale which ask for a maximum price of 30,000 yuan per square meter, according to Centaline data.


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