Shanghai, Beijing land markets cool as funding constraints squeeze developers
Money raised by developers in debt market slumped 92 per cent in January from a year earlier
A dramatic fall in the premiums being paid for land in Beijing and Shanghai suggests government efforts to cool the market by placing tough financing constraints on developers are having a profound effect.
Five parcels of land in the two cities sold at auction last week at premiums that were just a fraction of what they were a few months ago.
Three plots of residential land in Shanghai were sold last Friday for a total of 4.5 billion yuan, a premium of just 1 per cent above the government-set starting auction price. Two plots of commercial and residential land in Beijing were acquired by two groups of developers on Thursday at a 10 per cent premium, a total cost of 4.1 billion yuan.
The contrast could not be starker with the sizzling auctions a few months ago, before 21 Chinese cities were subject to an orchestrated move to impose tough measures to arrest runaway home prices. Even last November, two months after the watershed curbs, a plot in Fangshan sold at a 200 per cent premium. Longfor Properties and Beijing Capital Development Holdings fought through 203 rounds of bidding to secure the land. This time around, the winners emerged after seven rounds of bidding.
The locations of the land parcels on auction last week went some way to explaining the lack of enthusiasm. The three plots in Shanghai are in Nanhui New Town, the most southeasterly tip of Shanghai, facing the East China Sea. The two plots in Beijing are in Fangshan district, 55 kilometres south of the city centre.
The Fangshan plots also carried maximum limits on the bidding price and the cost of any homes built on them, which reduced their appeal although the selling price didn’t reach the imposed cap.