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China Property

Property market in Suzhou, China, remains on the boil

Two developers, drawn to the city near Shanghai, paid above the norm for two parcels of land

PUBLISHED : Thursday, 07 April, 2016, 6:10pm
UPDATED : Thursday, 07 April, 2016, 6:10pm

Suzhou’s housing market booms, despite measures introduced to tighten it.

Two land parcels in the eastern Chinese city went up for sale on Thursday. They drew more than 40 developers and sold at prices that far surpassed the city’s average home prices.

It reflected developers’ optimistic outlook.

Modern Land China, a Beijing developer, paid an average of more than 28,000 yuan (HK$33,593) per square metre for land in the Gusu district. That doubled the city’s average selling price in March of 14,205 yuan per square metre.

Another project went to Zhuhai Huafa Group. The company bought the land after 134 rounds of bidding at an auction. It paid 1.7 billion yuan, an average price of 25,919 yuan per square metre that represented a 133 per cent premium over the starting price.

“The land we bought is very scarce. It’s in the city centre,” Morden Land president Zhang Peng told South China Morning Post. “We are confident about earning a 25 per cent gross profit.”

Zhang said the selling price will be at least 35,000 yuan per square metre and the company plans to build villas there and pitch them to local high-end customers.

“New homes are in short supply in Suzhou and the city has had continuous net population inflows in recent years,” Zhang said. That will support the city’s stable home-price increases, he said.

The length of time it takes to sell the whole property stock in Suzhou — known as the inventory period — was 3.7 months in February. That’s one of the lowest in China, Deutsche Bank data shows.

Market sentiment has risen in some second tier-cities in past few months. Home prices in Suzhou, situated next to Shanghai, saw home prices surge 6 per cent in March, faster its larger neighbouring city and Shenzhen.

The tiers of cities in China usually refer to key characteristics of the city, including its and the provincial economic development, transport systems, infrastructure, historical and cultural significance. China’s first-tier cities are commonly held to be Beijing, Shanghai, Guangzhou, and Shenzhen.

Suzhou authorities last month announced new rules to rein in the rising home prices because of the risk that developers in the city will be unable to raise their selling prices more than six per cent within six months, or 12 per cent within a year.

It still hasn’t stopped developers rushing to the city.

Alan Jin, a property analyst at Mizuho Securities, said a property bubble may be building in Suzhou.

“There are not as many riches as in Shanghai,” he said.

Jin said risks for developers are increasing, because an overheated market may attract further policy tightening.