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July 15, 2016

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Land fever among real estate firms continues

THE fever among real estate developers to buy land in Shanghai to build homes continued unabated due to robust demand.

Hong Kong-listed Future Land Development Holdings Ltd beat over 10 rivals yesterday when it paid 3.7 billion yuan (US$554 million), or a premium of 77.4 percent to the reserve price, for the 19,959-square-meter site within the Middle Ring Road in the Liangcheng area of Hongkou District.

The bid was equivalent to about 67,409 yuan per square meter of gross floor area. But the actual GFA price for the saleable area was higher as only 80 percent of homes built on the site could be released to the open market under government requirements.

“This seems to me a high but still reasonable price given the extremely limited land supply in Hongkou,” said Lu Qilin, research director at Shanghai Homelink Real Estate Agency Co.

“Over the past decade, only two pieces of housing plots have been offered for auction in the district while the Liangcheng area, in particular, did not have any new housing projects for as long as eight years.”

New homes built on the Liangcheng site should easily exceed 100,000 yuan per square meter, analysts said. Most of the current homes in the neighborhood sell for no more than 70,000 yuan per square meter, data showed.

About one month ago, an entity of three domestic developers, including Future Land, agreed to pay above 2.2 billion yuan, or 24,104 yuan per square meter of gross floor area — tripling its asking price — for a 76,200-square-meter residential parcel in Xuhang in outlying Jiading Dstrict.

In the first half of this year, 20 housing plots were sold in the city with an average premium of 158.2 percent. Land sites for office and commercial use auctioned during the same period fetched an average premium of 17.9 percent, Homelink data showed.


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