China Property

China land prices return to record path despite government cooling measures

New high for luxury homes site in Beijing shows demand is rising in the top cities

PUBLISHED : Friday, 26 July, 2013, 12:00am
UPDATED : Friday, 26 July, 2013, 2:44pm

Land prices on the mainland may continue to set new highs despite government cooling measures, property analysts said after Beijing sold a luxury residential site for a record price this week.

"In large, first-tier cities, the property market is improving," Bocom International property analyst Alfred Lau said. "Capital is flowing into these cities again, where prices are now close to international levels. For example, the price of the site sold in Beijing a few days ago was as expensive as the ones in Hong Kong."

A 75,360 square metre site in Sunhe, near the airport in northeastern Beijing and known as the "central villa district", was sold to Cofco Property for 2.36 billion yuan (HK$2.96 billion) on Tuesday, the local land reserve centre said on its website.

The developer had committed to building 33,000 square metres of public rental housing to win the auction after a land-price ceiling was reached, it said. Excluding the portion for public housing, the site still fetched a record price of about 44,000 yuan per buildable square metre.

"The flow of capital to the property market in second-tier cities has slowed as there is abundant flat supply in these cities ... so foreign capital flows into first-tier cities again," Lau said.

He said home prices in first-tier cities had risen by about 10 per cent this year, an acceptable level given that income growth was about 10 to 15 per cent.

Alan Chiang Sheung-lai, the head of residential property at DTZ Greater China, said large property developers had achieved good sales in the past two years and had received low-cost loans from banks, enabling them to replenish their land banks.

"Local governments … need to sell land sites for capital. To attract real estate developers, they have been offering prime sites with good locations for sale," Chiang said, adding that land prices might set new highs again.

Land sales in 10 major cities rose 67 per cent year on year last month to 51 billion yuan, according to consultancy China Real Estate Information.

Additional reporting by Bloomberg