Wen casts a cloud over Beijing sale

PUBLISHED : Monday, 09 July, 2012, 12:00am
UPDATED : Monday, 09 July, 2012, 12:00am

Weekend warnings that Beijing would 'unswervingly' fight property speculation have cast a cloud over the proposed auction of a prime residential site there tomorrow.

The official Xinhua news agency reported on Saturday that Premier Wen Jiabao had noted that the mainland property market was still at a crucial stage, adding: 'We must unswervingly continue the work and make the fight against speculative property investment demand a long-term policy.'

The warning came just days before the auction of a 38,870 square metre residential site in Beijing's Haidian district, which had already been delayed.

The site was released for tender in June, with a deadline of July 4, but last week it was extended until tomorrow.

Since the site is in a prime location and can be developed into a high-end residential project, it was expected to sell for up to 30,000 yuan (HK$36,780) per square metre, which would have been a new high for the city in terms of gross floor area.

The city's municipal government announced last Wednesday that the deadline for the tender would be extended until tomorrow, and some analysts believed the delay showed the local government was concerned that a potential record-breaking deal would send a signal that it was adopting a stimulatory housing policy in defiance of the central government policy against property speculation.

The site is located in an area with many popular schools and universities, and it has attracted 10 bids from developers since it was launched on the market.

The highest bid so far was 1.956 billion yuan, or 25,161 yuan per sq m. Dickson Wong Hung, chief executive of Centaline Property (China), said the site was worth more than 2.33 billion yuan, or 30,000 yuan per sq m.

'New housing supply in the area is tight and demand for housing is strong as the area is close to universities and government offices. Flat prices in these estates range between 50,000 and 60,000 yuan per sq m,' he said.

But some analysts now warn that the local government may not sell the site on schedule.

And mainland media reported yesterday that if authorities went ahead with the sale, they may do so only after setting a cap on the land price in order to avoid attracting Beijing's ire with a record-breaking transaction after Wen issued the warning.

Alan Chiang Sheung-lai, head of mainland residential property at agency DTZ, said it was still uncertain whether the local government would proceed with the sale of the site tomorrow.

'The central government has no plan to relax its cooling measures in the property market, despite cutting interest rates twice in a month. If a local government released a prime site for sale, it would attract aggressive bidding and the land prices would be high,' he said.

Since there was a danger that an auction could boost property prices, Chiang believed there was a high possibility that the Beijing municipal government would withdraw the site from sale.

The site could yield a total gross floor area of 77,739 sq m.

'It is close to the Summer Palace and has the potential to be developed into a high-end residential project,' said Meggie Qin, head of research in Beijing for agency Jones Lang LaSalle.

'It is the best site released for sale this year,' she added.

Since controls over the property market would remain, Qin believed high-end residential prices would continue to fall.

But the decline would likely be less than 5 per cent in the second half of the year.