Property policies

Shanghai adds land supply for 20,000 rental homes to bring property prices under control

The city plans to supply 700,000 rental homes from 2016 to 2020

PUBLISHED : Thursday, 23 November, 2017, 1:38pm
UPDATED : Thursday, 23 November, 2017, 9:20pm

Shanghai’s government is offering six more parcels of land for rental home development, increasing the pace of land supply in a bid to rein in skyrocketing property prices.

The six plots put up by the municipal government for sale this week total 166,300 square metres with a combined starting bid price of 1.94 billion yuan (US$294 million). This brings the total land supply for residential leasing development since July 24, when the first such land was offered, to 1.26 million square metres or 28.9 per cent of the 4.36 million square metres the city has supplied so far this year.

The supply of land in the past four months was sufficient to build 20,000 units.

According to a study conducted by the property consultancy Homelink’s Shanghai-based research team, if such pace of land supply was maintained throughout the year, 20,000 rental homes could be provided per year.

Shanghai’s government has an ambitious goal to provide 700,000 rental homes from 2016 to 2020, which would account for 41 per cent of new supply on the market.

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“New land auction is just one of many ways to achieve this goal [of 700,000 units],” said Zhang Yue, chief analyst with Homelink in Shanghai. “The government can also buy existing homes from small landlords as well as government-affiliated institutions that hold huge idle inventory.”

However, analysts cautioned that one big factor that would decide the success of the programme was the location and proximity to public transport, schools and shops. So far most of the land being offered was on the fringe areas of Shanghai.

Another trend worrying observers was that private developers have been barred from the rental land scheme. All of the land parcels sold so far have gone to Shanghai municipal or district-level state-owned enterprises, which have acquired them at a fraction of the cost of land for private home development.

“These firms have very close ties with district or municipal governments,” said Lin Bo, a research head of China Real Estate Information Corp, a Shanghai-based consultancy. “Some of them actually owned those parcels of land even before the auction and the ‘public auction’ was just to reconfirm the ownership.”

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Other cities such as Beijing and Shenzhen have also been ramping up supply of land for rental home development. Beijing, for instance, has vowed to supply 400,000 rental units from 2017 to 2021.

Developing rental homes was identified as one of the five priorities for building a “long-term mechanism for housing market stabilisation” at a meeting this week in Wuhan, held by the housing ministry and the central bank. The government’s other priorities include building “joint-ownership homes” and redevelopment of shanty towns.