China property developer Country Garden wins Shanghai residential site

Guangdong-based developer Country Garden has entered the Shanghai residential market with the purchase of a plot of land for 607 million yuan (HK$769 million) in a public tender.

The purchase is seen by analysts as a strategic move as profit margins in third- and fourth-tier cities are declining. The recent sale of an equity stake to Ping An Insurance, the mainland's second-biggest insurer, strengthened the developer's confidence to make the move, they said.

On April 1, Country Garden announced the sale of 9.9 per cent of its enlarged share issue to Ping An through the sale of 2.24 billion new shares at HK$2.816 apiece.

The developer paid 8,534 yuan per square metre yesterday to acquire the 62,443.4 square metre site in Shanghai's Jiading district, beating a number of other developers including CIFI and Gemdale Properties.

"This is a good attempt to have a presence in a top-tier city as profit margins in third- and fourth-tier cities are declining," said David Hong, head of research at property consultancy China Real Estate Information Corp's Hong Kong office.

Country Garden, which has built many big projects in third- and fourth-tier cities, is one of seven mainland developers that managed to reap property sales of more than 100 billion yuan last year. But the developer reported a 44.32 per cent year-on-year decline in contracted sales to 17.73 billion yuan for the first quarter of this year.

Meanwhile, in Hong Kong, developers cast a vote of confidence in the low-density residential market, with Sino Land paying 30 per cent more than market watchers had expected to win a small luxury residential site in Sai Kung.

The Lands Department said yesterday it had awarded the 36,855 square foot site in Tui Min Hoi to Sino Land for HK$609 million.

As the site could yield a total gross floor area of 51,591 square feet, the price tag represents HK$11,804 per square foot.

"It is 30 per cent above my projection of HK$8,000 per square foot," said Alvin Lam Tsz-pun, a director at Midland Surveyors. He said such high prices indicated developers' eagerness to acquire development sites designated for luxury residential developments.

Victor Tin Sio-un, an associate director at Sino Land, said it would build a luxury villa project on the waterfront site. "It will become a landmark development in Sai Kung," he said.

Sino Land's optimism follows its sale of a 3,860 sqft house in the Botanica Bay project on Lantau for HK$109 million, or HK$28,320 per square foot of saleable area, through tender.

Tin said the details of the Sai Kung development had not been finalised.

Lam said Sino Land could build 10 houses, with areas ranging from 2,000 to 3,000 sqft each, while the remaining area could be used for apartments of 1,000 to 2,000 sqft.