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December 24, 2009

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Record price for land plot in Shanghai

THE highest price on record on China's mainland for housing land was paid in Shanghai yesterday.

A wholly owned subsidiary of China State Construction Engineering Corp acquired a 114,500-square-meter land plot in the city's northeastern Yangpu District for 3.72 billion yuan (US$544.84 million).

The company, which raised US$7.3 billion in July in the world's biggest initial public offering this year, beat rivals from home and abroad to secure the prime piece of real estate.

The plot in New Jiangwan Town designated for residential development was offered at a starting price of about 15,000 yuan per sqm and was finally sold for 32,484 yuan per sqm.

"It's a super crazy price and will definitely have a great impact on the city's already overheated housing market," said Xue Jianxiong, an analyst with E-House (China) Holdings Ltd, a major real estate services provider.

"With such a high price, buyers will naturally assume that home prices in Shanghai will continue to soar despite the fact that they already stand at record high levels."

However, according to industry experts, the developer may not be able to make a profit from the transaction if homes, likely to include both apartments and villas, built on the plot are sold for an average of less than 50,000 yuan per sqm.

Apartments in New Jiangwan Town fetch about 30,000 yuan per sqm while some villa projects are asking for between 35,000 yuan and 45,000 yuan per sqm.

New Jiangwan Town has been notorious in Shanghai over the past few years for its rapidly growing land prices.

Land plots designated for home development in that area were auctioned for about 6,700 yuan per sqm in November 2006.

They rose to 12,500 yuan in June 2007 and five months later soared to about 20,000 yuan.

"With a land price of more than 32,000 yuan per sqm, the developer has to build luxury projects on the plot to make ends meet," said Gong Min, a research manager at Shanghai Centaline Property Consultants Ltd.

"However, located between the Middle Ring Road and the Outer Ring Road with no eye-catching selling points, New Jiangwan Town is still immature on the luxury home front."

New home sales in Shanghai jumped to a four-month high in November while average prices rose to 18,686 yuan per sqm, the second-highest monthly average in 2009, according to Shanghai Uwin Real Estate Information Services Co.

In the second week of December, new home prices in Shanghai further soared to a record 22,270 yuan per sqm.


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