On Tuesday afternoon of last week, more than 438 bidders rolled up their sleeves and got ready to bid in the first online auction of US land open to mainland buyers.
Within 55 seconds, 71 bids were placed that hit the reserve price of US$8,800 for the purchase of a 10,000 sq ft site in southwestern Florida. The winner was due to be selected by a lucky draw yesterday.
'I had expected them to start bidding at the bottom. But they placed their highest prices from their first bids,' said Zhuang Nuo, managing director of SouFun International, a unit of US-listed SouFun Holdings, the mainland's biggest property website. SouFun organised the online land auction.
'The response showed there are many cash-rich mainland investors and they love to speculate on property,' Zhuang said. 'Austerity measures at home restrict their buying on the mainland, so they look offshore.'
The site was owned by a US firm called United Solutions of America, which approached SouFun International about selling its properties in Lee county in southwestern Florida to mainlanders.
The US firm purchases distressed properties from banks or buys from sellers who lack the funds to develop their planned projects.
To arouse buyers' interest and attract public attention, Zhuang decided to sell the site through an online auction, which was open for bidding for two hours. Under the rules set for the auction, bidding could start from US$1 and the site was to be sold to the highest bid above the reserved price of US$8,800.
The winning bidder would receive single land title and would be free to on-sell the site, Zhuang said. The proceeds from the winning bid would be remitted to a conveyancing lawyer and would not be given to the seller until all legal processes were completed.
Zhuang said the site value was about US$20,000. 'The auction was a gimmick to sell at a discounted price to draw attention. With US$8,800 or even the normal price of US$20,000, you could not buy a home in Shanghai, even in the suburbs.'
Zhuang said a buyer who wished to build a house on the site would face further investment costs of some US$20,000 for constructing a two-storey house.
The central government introduced measures this year restricting the number of residential property purchases on the mainland.
'Even if prices drop, these speculators cannot buy, as they own more than two units already,' Zhuang said. 'Cash-rich mainlanders have therefore been looking for other channels to speculate.'
The cachet of owning land in the US was an added attraction, he said. 'Many mainland Chinese still admire the US, and to say that you own a site in Florida will earn you respect and admiration.'
To respond to this demand, he said, SouFun had opened an international office this year. It was now arranging an online sale of 120 sites of around 10,000 sq ft, priced at around US$19,988 each, to begin on Friday.
The approximate number of auctions held each year by the US Treasury Department
- These often sell seized real estate