Land purchase continues to run high

By Cherry Cao | July 14, 2016, Thursday |

Online Edition

The land purchase fever in Shanghai didn't take a break as real estate developers remained thirsty for residential plots amid continuously robust housing demand.

Hong Kong-listed Future Land Development Holdings Ltd beat more than 10 rivals today when it paid 3.7 billion yuan (US$552 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 Liangcheng area, 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 even higher as only 80 percent of homes built on the site could be released to the open market due to government requirements.

"This seems to me a high but still reasonable price given the extremely limited land supply in Hongkou," said Lu Qilin, director of research 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 Liangcheng area, in particular, roughly saw no new residential projects coming out for as long as eight years."

Inventory of new homes in Liangcheng area stood at just 1,120 square meters as of today, one of the least around the city, according to Homelink data.

Price for new houses built on the Liangcheng site should comfortably exceed 100,000 yuan per square meter, industry analysts predicted. Currently, most of the existing homes in the neighborhood sell for no more than 70,000 yuan per square meter, market data showed.

About one month ago, an entity of three domestic developers including Future Land agreed to pay more than 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 six months of this year, 20 residential plots were sold across the city with an average premium of 158.2 percent, making it a common scene that land price sitting well above home cost in the same neighborhood. That, however, compared with an average premium of 17.9 percent for land sites for office and commercial uses auctioned during the same period, Homelink data showed.

Real Estate

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Land purchase continues to run high

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