Large Guangzhou site sells for record price

PUBLISHED : Wednesday, 12 June, 2013, 12:00am
UPDATED : Wednesday, 12 June, 2013, 4:07am

A large residential site in Guangzhou sold for a record 4.56 billion yuan (HK$5.73 billion) at a government auction last week, underscoring optimism about the housing market in first-tier cities over the next several years.

After more than 160 rounds of bidding, mid-sized developer Kaisa Group teamed up with a local partner to outbid major developers such as China Overseas Land & Investment, Greenland, and China Vanke to secure the 200,000 square metre residential site in the Huangpu district. The site will yield a total built area of 583,600 square metres.

"There was wide media coverage of the recent record-high land auction prices. Our analysis of land sales in major cities suggests that [record-setting] sales are concentrated in tier one cities, unlike in 2009-10," said Lee Wee Liat, the head of property research at BNP Paribas Securities (Asia).

Under the auction system in Guangzhou, sites are sold at a fixed land price, and bidders compete on undertakings to provide social housing.

In the latest tender the Kaisa consortium won the site because it agreed to set aside or 33.8 per cent of the site area for the social housing, while the remaining 425,200 square metres will be developed into private housing that it can sell in the open market. The consortium's contribution of social housing was the highest among the bidders.

With one third of the site area committed to social housing, property consultants estimate the 4.56 billion yuan price tag represents an accommodation value of 10,000 yuan per square metre for the remaining area designated for private housing.

"We think the government is not very worried about the recent [record-setting] deals given their nature," Lee said.

"We are positive about the government's strategy as it should reduce the risk of shock and disruption to property transaction volumes in the short and medium terms."