Beijing puts prime land near third ring road up for sale again at higher price

Authorities have reopened the sale of a plot of land that was scrapped last month over concerns the price could reach a record, but their decision to set an even higher starting bid highlights a tough dilemma facing mainland policymakers fearful of a property bubble.

The central government's three-year campaign to rein in housing inflation has butted up against strong demand, shortages of property and land, and the need of city-level governments such as Beijing to sell land to boost revenue.

"Actually policymakers are worried about the current situation in the property market as there are not so effective measures in the short term," said Zou Xiaoyun, deputy chief engineer at the China Land Surveying and Planning Institute, a research unit under the Ministry of Land in Beijing.

"The government is the only one in the market to control the land supply. The land supply model itself is unbalanced," he said.

The central government wants more people to move to the cities, but it is concerned over the possibility of a property bubble and the debt risk that would entail. It is also concerned that high prices will affect social stability as more mainland residents find themselves priced out of the property market.

Home prices in May rose 6 per cent, the fifth consecutive increase and the fastest annual pace since January 2011 when Reuters started to calculate the nationwide data. Beijing, Shanghai, Guangzhou and Shenzhen were among cities leading the price rises.

Local governments, meanwhile, have stronger incentives to push up prices as revenues from land sales are a key source of income, even though they have been directed by the central government to increase land supply and cap home prices to keep a lid on social discontent.