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July 2, 2016

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Demand drives Shanghai’s land sales to rise above US$7.5b in H1

SHANGHAI’S land sales exceeded 50 billion yuan (US$7.5 billion) in the first half of the year, with half of the plots fetching above twice their reserve price, latest market data suggest.

In the January-June period, 30 land parcels covering 1.28 million square meters were sold across the city for 50.6 billion yuan, a year-on-year drop of 10.4 percent by value, Shanghai Homelink Real Estate Agency Co said in a report released yesterday.

“Fifteen of the 30 plots sold during the six-month period managed to record a premium of more than 100 percent,” said Lu Qilin, director of research at Homelink.

Lu said the city’s land market remained red-hot in the first six months as “developers showed an extremely robust appetite for residential plots in Shanghai despite their suburban locale.”

Two thirds of the 30 plots were developed for purely housing, and the average premium for these 20 parcels stood at 158.2 percent. That compared with an average premium of 17.9 percent for land sites for office and commercial uses during the same period.

“It’s pretty common to see land price exceed home cost in the neighborhood these days as developers, in the long-term, remained very upbeat in first-tier cities like Shanghai where land supply always seems to be inadequate,” Lu said.

“In order to make a fair profit, developers have to build medium to high-end projects on these costly sites even though many of them are located in outlying areas and that would probably mean home prices will continue to rise in the city.”

An example of the current land purchase fever is Hong Kong-listed KWG Property Holdings Ltd paying an average 39,073 yuan per square meter of gross floor area yesterday for a housing parcel in outlying Songjiang District, or a premium of above 56 percent. The actual GFA price exceeded 41,100 yuan per square meter as 5 percent of new homes built on the site are required to be handed to the government as affordable housing.

New houses in the neighborhood are sold for no more than 37,000 yuan per square meter, Homelink data showed.


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