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Land prices smash records in Beijing property frenzy

BEIJING: Two land sales in Beijing have shattered price records and both buyers were state-owned companies, sparking outrage and astonishment at the city's frothy property market.

The soaring land prices came as worries have mounted about a housing bubble in China, though economists said that the latest auction prices reflected peculiarities of the Beijing market and did not necessarily point to nationwide trouble.

China has tweaked taxes and stiffened mortgage rules in recent months to cool housing prices and analysts think it may hold off on further propery curbs for a while amid signs that these earlier measures have had some success.

But many in the market think the country's third increase this year of banks' required reserves is imminent to counter broader inflationary pressures.

A plot of residential land in Dongsheng, a 15-minute drive from the centre of Beijing, was auctioned for 28,000 yuan (RM13,571) per sq m, the highest price ever paid in the city -- and just a fraction below the area's average house price.

At a separate auction, a 185,000-sq m block of residential land deep in suburbia in Yizhuang went for 5.25 billion yuan, the most ever paid in a single land transaction in Beijing.

An added wrinkle was that in both cases the buyers were state-owned enterprises (SOEs).

China Ordnance Equipment Group Corp, a military company, bought the Dongsheng land. CITIC Group, the country's largest financial conglomerate and one which is directly led by the State Council, China's cabinet, bought the Yizhuang plot.

"The SOEs get even wilder. A crazy day for the Beijing land market" screamed the headline of the Chinese-language 21st Century Business Herald.

Private developers have complained that the deck was stacked in favour of state-run firms in Beijing's land auctions because the city required bidders to have registered assets that far outstrip those of some of the biggest listed property companies.

Liu Liyong, a research director at E-House China, a leading real estate service company, said state firms benefit from a close relationship with the government as well as vast capital bases.

"That's why the SOEs can always win the land auctions," Liu said.

Property prices across China rose 10.7% in February from a year earlier, though prices have increased far more steeply in certain segments of the market, such as high-end housing in top cities like Beijing and Shanghai.

Land prices have been even hotter, more than doubling over the past year. Feng Ke, a finance and property professor at Beijing University, said it was only natural for prices to rocket in the capital.

"Land demand far exceeds supply because of the accelerating progress of urbanisation," Feng said.

"Besides, the cost for primary developers in preparing a piece of land, including expenses in relocating residents and land clearance, has also increased in recent years, so it is understandable that land can be sold at such a high price."

But the country's most successful private property developers have been sidelined in the process.

SOHO China, whose avant-garde buildings have made an indelible mark on the centre of Beijing, sat out the auctions.

SOHO chairman Pan Shiyi chided Ren Zhiqiang, chairman of Huayuan Property and China's best-paid property tycoon, for his failed bid, saying there was no point in battling against state-backed firms.

"Mr Ren did not listen to me, and paid hundreds of millions of yuan in deposits to participate in the bidding," Pan wrote on his blog. "It is not spending money for land but for shame."

Ren replied that he would persevere.

"At least, we are still there," he wrote. "Mr Pan has no guts to even get in. The auction system has killed all of Pan's confidence and courage." -- Reuters

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