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September 11, 2009

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Home » Business » Real Estate

Firm pays record price for land

CHINA Overseas Land & Investment Ltd, a Hong Kong-listed real estate developer, acquired a 142,000 square meter land plot in Shanghai yesterday for a record price of 7 billion yuan (US$1.02 billion), the most expensive land piece sold in the country so far this year.

The per gross floor area, or GFA, price for the plot, located in the Changfeng area in the northwestern Putuo District and designated for residential use, was 22,400 yuan per square meter, also the highest ever reached in the area.

"Home prices in Changfeng, and likely the whole city, might rise following the new record price of land," said Xue Jianxiong, an analyst with E-House (China) Holdings Ltd. "But I don't think such price increase could be sustainable for long as rapidly growing home prices over the past months have already dampened buying interest and hurt volumes."

At present, homes in surrounding areas are sold at a maximum of 21,000 yuan per square meter, according to Shanghai Centaline Property Consultants Ltd, operator of the city's largest real estate brokerage chain.

In fact, while average housing prices continued to rise in Shanghai in August, the transaction volume of new homes as well as existing ones started to fall from July amid decreasing affordability.

However, most real estate developers still maintain an optimistic outlook on the country's property market as they have been accelerating their purchase of land recently amid a moderately loose lending policy at commercial banks and booming home sales.

In terms of GFA space, acquisitions of land for residential use totaled 19.7 million square meters in 10 major Chinese cities between April and June, a quarter-on-quarter jump of 360 percent, DTZ, a real estate services firm, said in its latest market research.

"Developers are showing rising interest in expanding their footprint over the past few months in the residential market," said Alan Chiang, head of residential DTZ China. "Nearly 60 percent of land sold in the period was for residential use, compared with 20 percent in the first quarter."


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