Beijing starts land list auction

PUBLISHED : Wednesday, 13 May, 2009, 12:00am
UPDATED : Wednesday, 13 May, 2009, 12:00am

The Beijing government launched a land application list system in the capital last week to avoid unsuccessful auctions of sites available for sale.

The local government placed four sites on its land application list last Tuesday.

Interested developers must now undertake to make a bid at or above the listed reserve price and make a pre-sale deposit of 200,000 yuan (HK$227,563) that will be forfeited if they do not join the bidding.

The four sites, located in the Daxing district, could be used for commercial or residential projects with total gross floor areas ranging from 75,403 to 457,961 square metres.

Reserve prices range from 228 million yuan to 1.4 billion yuan.

'The sites should be welcomed by developers,' said Feng Changchun, head of the Centre of Real Estate Studies and Appraisals at Peking University.

'The district has potential for great change, as a light railway connecting it with the urban areas of Beijing is under construction,' said Mr Feng.

Li Wenjie, a general manager at Centaline (China) in Beijing, believes the new system can ensure that a developer will join the tender and offer the reserve price of the site.

'Last year, we saw many sites withdrawn from the tender or auction owing to poor market response,' said Mr Li.

'The new policy and the sites on offer can help the government overcome its previous unsuccessful land sales.'

Most developers have put new land acquisition plans on hold since last year as a result of the poor sentiment in the real estate market. So far, bidding for development sites has not been as aggressive as was seen in 2007.

As a result, the local government had to withdraw several development sites from auction last year following a recurrence of insufficient bidders or offers regarded as too low.

A development site in the Tongzhou district in Beijing was slated for sale in November but was withdrawn from auction by the government as just two contenders bid for the site, failing to meet the minimum requirement of three bidders.

Richard Wang, an associate director of consulting and research at DTZ, said he believed the new land list policy could help the government reduce the risk of unsuccessful land sales. He, however, expressed surprise at the timing of the new system.

'This system is useful, particularly in a property market down cycle. But the property market is getting better now, and developers are interested in land acquisition again,' he said.

David Hand, the head of the investment department for China at Jones Lang LaSalle, said the new system could improve pricing transparency.

'Applications to trigger a land sale, whether successful or not, will provide developers and property market practitioners with a greater indication of open market land and property prices,' Mr Hand said.

But Yi Xianrong, a researcher at the financial research centre of the Chinese Academy of Social Sciences, said new policies were less important than sound relationships between the government and developers.

'On the mainland, local governments will not sell sites purely based on the details of the offers but rather their relationships with developers,' Mr Yi said.