Update | Property developers undeterred by Beijing’s market-cooling auction restrictions

Property developers, desperate to acquire land for their projects, have steamrolled a three-step process that Beijing’s government put in to cap land costs, in a sign that the new rules are inadequate to rein in runaway housing prices in the Chinese capital.

Only one of four pieces of land put up for auction this week in Beijing found a winner, as bids from about 20 developers blew threw the first two stages of the process within minutes.

On Thursday, a 183,300 square meter (1.97 million square feet) parcel of land in Haidian district sold for 5.76 billion yuan (HK$6.5 billion), when the sole bidding consortium of three developers pledged to keep 100 per cent of the apartment units built on the land for rent only, acceding to the government’s plan to keep housing affordable.

The average price of newly built residential buildings have soared 28 per cent in Beijing in the past year, according to the National Bureau of Statistics. There’s a shortage of land suitable for construction, as the government -- the ultimate land owner in China -- has sold only 10 parcels this year before this week’s auctions.

Under the Beijing municipal government’s September 30 rules for land auctions, the winning bid must go through a three-step process.

The first step caps the maximum bidding price in place of the former winner-takes-all approach; the second step awards the winning bid to the developer willing to offer the largest share of space for rent. If the two steps still fail to produce a single winner, the final stage awards the land based on the quality of the apartments built in a closed door judgement.

That was the case on Wednesday, when a piece of land measuring 83,550 square metres in Haidian reached the first cap within minutes with a company’s 5 billion yuan bid.