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Property curbs fear as mainland firms pay record prices for sites

Record prices being paid for development sites on the mainland have heightened concerns that Beijing will introduce new measures to cool the property market.

A high-end residential site in Shanghai's Xin Jiang Wan Cheng district was sold to China State Construction Engineering Corp yesterday for 3.72 billion yuan (HK$4.22 billion), or 32,484 yuan per square metre, the highest unit price for a mainland plot.

The price is 9 per cent higher than the previous record of 29,859 yuan per square metre that state-owned Beijing Dalong Estates paid for a site in the capital last month.

The purchase follows Tuesday's record 25.5 billion yuan paid for a single plot — a Guangzhou Asian Games City development site — by a consortium comprising Guangzhou R&F Properties, Agile Property Holdings and Country Garden Holdings at another public auction.

Shanghai-listed China State Construction outbid eight developers to win the site. The price is 117 per cent higher than the opening bid of 1.72 billion yuan.

Xin Jiang Wan Cheng is a new luxury residential area in Shanghai. Prices of the most recent project in the area being developed by China Resources Land range between 45,000 yuan and 50,000 yuan per square metre.

Clement Luk, a deputy general manager at Centaline China in Shanghai, said China State Construction would have to achieve an average price of at least 55,000 yuan per square metre to generate a reasonable profit.

However, he said Beijing would not be happy with the record-breaking land prices, adding they could force the central government to issue more measures to cool the property market.

The sentiment was shared by Huang Tao, a project manager at Centaline China's Guangzhou office, following the price paid for the Asian Games City site.

However, he added that this was not the only challenge facing the three-member Guangzhou consortium. "This is the first time for them to develop a project together. They need time to adapt to each other," he said.

The market originally expected a consortium comprising state-owned developers China Vanke and Poly Real Estate Group to win the site as they had put together an opening bid of 16.5 billion yuan.

However, a property analyst said the aggressive bidding by R&F Properties surprised the state-owned developers. "We were one of the consultants of Poly Real Estate. We suggested the developer not submit a bid higher than 20 billion yuan," he said.

"It was easier for the privately owned developer to raise the upper limit of the bid as the process for the state-owned developers to do so is longer. They could not raise the limit just by making a call."

John So, an analyst at ICBC International Research, expects property sales volume to drop next year as Beijing tightens the mortgage market. "We won't see strong growth in property prices next year as new supply will increase substantially," he said. — South China Morning Post

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