Shanghai lifts currency ban for auction deposits
Shanghai has lifted a ban on using foreign currency to pay for initial deposits in a government auction next month, underscoring its eagerness to lure cashed-up foreign developers to boost ailing land sale.
In December 2007, the municipal government required only yuan deposits to be paid to support Beijing's efforts to tighten monetary policy to prevent an influx of hot money that was pushing up land prices.
According to a posting on the Shanghai Municipal Housing, Land and Resource Administration Bureau website yesterday, the government would accept four foreign currencies, the US dollar, Hong Kong dollar, euro and yen, as deposits for the auction of a prime site next month.
Up for grabs is an 8,793 square metre commercial site in Jingan district in the city centre with a floor price of 740 million yuan (HK$839.38 million). So far, 26 developers have expressed interest.
'Undoubtedly, the relaxation indicates the government is keen on attracting more bidders as the city's land sale revenue shrank 70 per cent last year,' said Jim Yip Kin-shing, the head of investment for North China at DTZ. Major developers such as China Vanke, the largest on the mainland, acquired 44 per cent less land last year from 2007 to 5.15 million square metres. China Merchants Property Group only bought 1.8 million sqmetres, down 60 per cent.
To sell more land, the local government needed to bring in overseas investors instead of solely depending on cash-hungry domestic developers, Mr Yip said. He said the Jingan site would serve as a benchmark for the commercial market after the global financial crisis. It could generate bids of as high as 35,000 yuan per square metre, against the floor price of 28,050 yuan per square metre.
'The land will achieve a higher price if there are more bidders.'
Clement Leung Wai-ming, an executive director for China valuation at Knight Frank, said the relaxation could make it easier for newcomers who did not have a reserve in yuan. 'It will be easier and more convenient for foreigners to participate in the government land auction.'
Separately, Hutchison Whampoa Properties said it was in talk with interested buyers over the sale of a retail premise with a combined area of 2,300 sqmetres in Gubei, Shanghai. Mainland website Hexun.com earlier reported that the group was asking 150 million yuan for the property.