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Industrial plots a bright spot of 2008

By Cao Qian | January 6, 2009, Tuesday | Print Edition

LAST year was an unforgettable one for the country's real estate developers, but for all the wrong reasons.

Most of them, regardless of size, suffered major setbacks amid a tightened credit policy which was later made worse by the worldwide economic slowdown. Home sales fell in most parts of the country and land sales failed to fetch the high prices achieved in 2007.

In Shanghai, plots designated for industrial use accounted for more than 75 percent of total land supply last year. The per Gross Floor Area price for land plots in the city fell to 1,442 yuan (US$210) per square meter, a year-on-year drop of about 50 percent, according to statistics from the research department of E-House (China) Holdings Ltd based on calculations from January to November.

Here is a brief yearly review of the city's land market:

Huge supply of industrial plots

Of the total land available for public bidding and auctioning in the city in 2008, plots designated for industrial use accounted for 76 percent, a significant increase compared to the 56 percent for 2007.

Meanwhile, land for mixed-purposes, residential use, commercial and office use each took 11 percent, 8 percent and 4 percent, respectively.

Plots of land solely designated for office buildings were less than 1 percent of the total supply.

GFA prices fall and the number of failed cases in land bidding and auctioning grows

Gross Floor Area price for land plots transferred in the city fell to 1,442 yuan per square meter, compared to 2,894 yuan per square meter in 2007. This drop was partly affected by the huge amount of transactions involving industrial use plots which are usually sold at cheap prices.

As for land plots for residential use, a total of 2.77 million square meters of GFA space had been offered to the local market, but only 1.70 million square meters were sold, which means about 38 percent failed to find a buyer.

Land supply was bigger in remote areas of the city but a small amount was located in downtown areas

In 2008, suburban Chongming County, Qingpu District and Nanhui District led all in the city, boasting the largest supply of land, with each of them offering more than 500,000 square meters of land during the period. The districts of Baoshan, Fengxian and Jinshan followed suit with 490,000, 320,000 and 300,000 square meters of land available respectively. In some downtown districts such as Huangpu, Luwan and Jing'an, there was zero supply of land.

Industrial use land plots led in terms of transactions

Due to its huge supply, about 76 percent of land sold in the city in 2008 through auctioning and bidding were designated for industrial use, whereas 13 percent were for mixed-use and 7 percent for residential development.

Land plots for retail property and commercial/office uses each took up 1 percent and 3 percent.



Most land plots acquired in the city were located beyond the Outer Ring Road as a result of the supply

Jiading, Nanhui and Baoshan districts saw the most land deals in 2008 while Chongming, Qingpu, Pudong New Area and Songjiang followed immediately. Downtown districts like Jing'an and Luwan did not see any land deals.

Price discrepancies among different land plots

Land plots designated for retail uses were acquired at the highest prices (in terms of GFA price), followed by those allocated for commercial/office, residential, mixed-use, office, and industrial development.

For this year, the supply of local land might continue to plummet with plots designated for industrial use continuing to take the lion's share of transactions and land prices will remain relatively stable, said analysts at E-House (China) Holdings Ltd.

Specifically, land supply for new residential properties, excluding those designed for relocation use, would be around 5 million square meters a year on average through 2012.

Those for relocated residents as well as for budget homes and low-rent houses would take a combined 50 percent of total supply during the period.

The local government will continue to freeze land supply for villas and restrict it for large apartments.

Market to trade land created

Shanghai launched its first city-level land transaction market in March 2008.

The Shanghai Land Transaction Market in Pudong New Area was designed to establish a unified, fair and transparent platform for the city's land transaction services, officials from the Shanghai Land and Resources Administration Bureau said.

Its main functions include distributing land information, conducting land bidding and auctions, and offering brokerage services.

"It is as a major reform conducted by the local industry watchdog as it helps guarantee fair play in all processes involved in land transactions," said Fu Qi, an analyst at E-House (China) Holdings Ltd.

From March 1, all land-related deals - including acquiring, leasing and the transfer of land-development rights - are required to be completed through the market.

Previously, such transactions were through district and county-level centers.

Preparation to set up the central market began in the second half of 2007 and trials were completed in January 2008.

Shanghai introduced its public land-transferring mechanism early in 2003, with all land transfers required to be completed through public bidding and auctioning.

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