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Shanghai land sale flies in face of cabinet warning

PUBLISHED : Friday, 27 July, 2012, 12:00am
UPDATED : Friday, 27 July, 2012, 12:00am

A residential site in Shanghai sold at auction for 1.64 billion yuan (HK$2.01 billion) after a fierce bidding among 11 developers, despite a State Council warning of possible tightening in property curbs.

The site was sold on Wednesday to a joint venture between Sunac China Holdings and Greentown China for about 37 per cent above the 1.2 billion yuan opening bid, sounding an alarm bell for the authorities.

'Beijing is very sensitive on the issue as policymakers don't want to see a sharp rebound in home and land prices,' said Alfred Lau, property analyst at Bocom International, the investment banking unit of the Bank of Communications.

The State Council started sending inspection teams this month to check local enforcement of existing curbs on home purchases and local supply in four municipalities, including Beijing and Shanghai, and 12 provinces, including Zhejiang, Jiangsu, Fujian and Hunan, according to a government statement on Tuesday. The inspectors would visit housing projects and meet homebuyers to gather more information about the market, the cabinet said.

Yesterday, shares in mainland property developers extended losses for a second consecutive session on worries that Beijing might introduce further tightening measures in the sector to keep housing prices in check.

Poly Real Estate dropped 3.86 per cent to 10.72 yuan, Gemdale fell 2.73 per cent to 5.71 yuan and China Vanke lost 2.09 per cent to 8.91 yuan.

In Hong Kong, Sunac shares fell 1.29 per cent to HK$3.04 but Greentown China edged up 0.88 per cent to HK$8.17.

But Lau said developers were not likely to stop buying land in first-tier cities, including Shanghai and Beijing, where buying demand remained strong.

'For developers, they need to replenish their land bank once their developments have sold out in a city,' he said.

David Ji, the head of greater China research at property brokers DTZ, said it was difficult to comment on individual developer behaviour.

'It is purely their commercial decision,' Ji said.

The site, located adjacent to Tangzhen subway station in Pudong, comprises 109,203 square metres of gross floor area. The price tag of 1.64 billion yuan represents an accommodation cost of 15,058 yuan per square metre.

According to the land sale document, the site is designated for units of up to 90 square metres. The winning developer is required to set aside 5 per cent of the gross floor area for affordable housing.