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Land prices remain solid in Shanghai

Three land parcels in Shanghai’s western Qingpu District fetched high prices again today, latest evidence that real estate developers' appetite for land parcels remained strong.

Country Garden, one of the largest developers in China, paid 1.4 billion yuan (US$211 million), or a premium of 101 percent to the reserve price, for a 23,450-square-meter residential piece in outlying Qingpu. Another 30,730-square-meter housing parcel was sold to Beijing Capital Land Co for 1.9 billion yuan, or a premium of 108 percent.

The third piece, designated for both residential and commercial uses covering a site area of 36,279 square meters, was sold to Jiangsu Province-based Zhongnan Group for 1.96 billion yuan, or a premium of 54 percent to the reserve price.

In terms of gross floor area price, Country Garden's bid was equivalent to 30,107 yuan per square meter, while Beijing Capital's bid stayed at 31,126 yuan per square meter. Price for Zhongnan's mix-use land plot was around 21,610 yuan per square meter.

"These land prices are pretty high as most of the new homes in the neighbourhood cost between 30,000 yuan and 31,000 yuan per square meter at the moment," said Lu Wenxi, senior manager of research at Shanghai Centaline Property Consultants Co. "However, the area will be accessible by metro lines as early as the end of next year and that will often lift home prices by at least 15 or 20 percent."

Both Beijing Capital and Zhongnan have already got development projects in the neighbourhood and that could help explain their ambitious moves to expand land banks in the same area, Lu added.

New homes built on these sites should sell for at least 46,000 yuan per square meter or developers won't be able to make fair profit, industry analysts said.


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