Developers on a Shopping Spree for Land

[Click for Chinese Version]

A sudden rebound has emerged in Beijing's land market after a short lull, following the conclusion of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC), as developers queued up to break records on land deals.

After 84 rounds of bidding at an auction March 15, a subsidiary of Sino-Ocean Land Holdings Ltd. bought a plot of land in the Wangjing area, east Beijing's Chaoyang district, for 4.08 billion yuan, a record deal for this year. The floor price of the deal reached 27,500 yuan per square meter. The company said it will develop the plot into a mixed-use residential project.

The record was only maintained for several hours. In the afternoon of the same day, a subsidiary of CITIC Group won in another auction in Beijing to buy a plot in the city's southern Daxin district for a record 5.24 billion yuan, beating major developers, including Poly Real Estate. The floor price of the plot was around 17,000 yuan per square meter.

In separate auctions, a property company under China Ordnance Equipment Group Corp. bought a plot for a commercial residence project for 1.76 billion yuan in north Beijing, 1.1 billion yuan more than the base price. The other three plots of land in the suburbs of Beijing at auction were also sold at prices much higher than base prices.

State-owned enterprises played a major role in record land auctions. However, staggering bidding prices has raised serious concern in the market.

Ren Zhiqiang, president of Beijing Huayuan Group who also participated in the auction of the Wangjing plot, said in his blog the price was "unaffordable" and that his company will switch its focus to second and third-tier cities in the future. Huayuan paid a 400 million yuan deposit to participate in the auction but dropped out of bidding after the price reached 10,000 yuan per square meter.

Ren said that the prices at land auctions violate the central government's policy and the auctions will only serve to further push up property prices.

Pan Shiyi, chairman of Beijing-based developer SOHO China, described the fierce competition at land auctions as "bizarre." He said the new "land kings" will continue to drive up Beijing's property prices. SOHO predicted that the Wangjing project needs to set sale prices at 45,000 yuan per square meter in order to generate profit.

The auctions of the total of six land plots were originally set to be held on March 8. According to the official Xinhua News Agency, the postponement of the auction was timed to avoid public dissatisfaction on the growth of land and property prices during this year's NPC and CPPCC sessions.

However, market analysts warned that the immediate rebound of land auction prices after the conferences reflects optimism on behalf of developers on the property market, but works against government policies to tamp down rises in property prices.

The Beijing land and resources regulator is set to hold another auction of a plot with an estimated value of 10 billion yuan on March 25.