Yuexiu pays record 9b yuan for Wuhan site in auction

Mainland company bids record price for Wuhan plot that will be developed into an office, commercial and residential complex

PUBLISHED : Friday, 13 September, 2013, 12:00am
UPDATED : Friday, 13 September, 2013, 10:52pm

Yuexiu Property yesterday won an auction for a site in Wuhan, the capital of Hubei province, for 9.01 billion yuan (HK$11.4 billion), in the latest in a string of aggressive land acquisitions by developers across the mainland.

Indirectly controlled by the Guangzhou government, Yuexiu outbid rivals such as Shanghai-based Shimao Property and Beijing-based Financial Street to win the site, which will be developed into an office-residential-shopping complex.

The 182,270 square metre site - at 12,617 yuan per square metre - became the most expensive sold in Wuhan in terms of lump sum and accommodation value.

Rising land costs on the mainland have some analysts expressing concerns about developers' profit margins.

"Developers who paid high prices for land sites are now expecting property prices will rise significantly," said Lee Wee Liat, the regional head of property research at BNP Paribas. "If the performance is not as good as expected, profit margins will be squeezed."

Sun Hung Kai Properties, Hong Kong's largest developer by market value, paid a record 21.77 billion yuan last week for a prime commercial site in Xujiahui, a shopping and entertainment district in Shanghai.

It was the second-highest price paid for a block of land on the mainland, trailing only the former Asian Games city site in Guangzhou, which sold for 25.5 billion yuan in 2010.

Also last week, five sites in Hangzhou and Suzhou were sold at record or very high prices, even though Beijing is sticking with tough measures designed to check rising property prices.

Sunac China paid 2.1 billion yuan, or 73,000 yuan per square metre, for a residential site in Beijing, setting a record for price per square metre in the capital.

Developers caught up in the land acquisition spree could see significant margin compression in three years or a big slowdown in sales if property price growth did not accelerate, Lee said.

"The scene is starting to look like that of the late 2009-10. A land acquisition trap has opened up," he said, adding that developers which bought land in 2010 had suffered through two years of poor sales.

Yuexiu Property, formerly known as Guangzhou Investment, was listed in Hong Kong in December 1992 as a red chip. Its substantial shareholder, Guangzhou Yuexiu Holdings, is under the supervision of Guangzhou's State-owned Assets Supervision and Administration Commission.

It changed its name in 2009, disposing of non-property assets to become a property developer.

Last month, Yuexiu announced a 48.2 per cent rise in net profit to 2.34 billion yuan.

The company's shares yesterday closed 1.78 per cent lower at HK$2.21 in a market that edged up 0.07 per cent.