China Vanke and Cofco pay 1.75b yuan for site

PUBLISHED : Saturday, 09 September, 2006, 12:00am
UPDATED : Saturday, 09 September, 2006, 12:00am

China Vanke, the mainland's largest listed developer, has teamed up with Cofco Property to buy a residential site in Guangzhou for 1.75 billion yuan, about 34 per cent higher than market expectations.

Under the new central government rules to cool property speculation, at least 80 per cent of the project has to be set aside to develop flats whose size must not exceed 90 square metres.

Still, the site attracted seven developers to submit bids. Vanke and Cofco Property, the property arm of China National Cereals, Oils and Foodstuffs Corp, won the site with a bid that valued it at 4,033 yuan per square metre.

The accommodation value was a record high for a residential site in Guangzhou, even though its location, in Jinshazhou district, was near subsidised housing projects, market watchers said.

'Under the terms of the lease, the developer has to build 10 per cent of total gross floor area into elderly homes,' said a mainland developer.

'We had expected the site would sell for accommodation value of 3,000 yuan per square metre.

'It showed the developers are confident about the property market and demand for small units.

'It also indicated that the cooling measures may not be effective as developers are still willing to buy sites with aggressive prices, which will in turn push up property prices.'

Fu Wai-ching, the chairman of Guangzhou's largest property agent Hopefluent Group Holdings, said the average flat price of new projects in Jinshazhou was 6,500 yuan per square metre.

Analysts estimated Vanke and Cofco Property would make reasonable profit if average flat prices of the project at their newly acquired site reached 8,000 yuan per square metre. The 145,000 sqmetre site will be developed into a mass residential project with a gross floor area of 434,000 sqmetres.

'Vanke has developed a residential project in Jinshazhou which has turned the old district into a middle-class residential district,' Mr Fu said.

Vanke has a land bank of 19.98 million sqmetres, according to Macquarie's research.

The developer expects private agreements will take up 70 per cent of future land acquisitions.

Property sales of Vanke reached 1.68 billion yuan last month, helping the developer to achieve 87 per cent of its sales target for the full year.

Vanke shares gained 1.04 per cent to close at 6.78 yuan on the Shenzhen Stock Exchange yesterday while Cofco Property climbed 3.16 per cent to 8.15 yuan.