China land deal highlights booming property market
Trends of high-value land deals reflect the booming property market in China. This week, a plot of residential land was sold for a record price, a sign that the country's real estate is heating up as the economy recovers.
September 06, 2013 / 15:46 IST
A plot of Chinese residential land sold for a record price this week, a sign that the country's property market is heating up again as the economy recovers.
The 28,168-square metre parcel of land in one of the wealthiest areas of Beijing was bought by Sunac China for Rmb2.1bn (USD 343mn). Including a commitment to build a hospital at a separate site, the total price worked out to Rmb73,000 per square metre of buildable space, the most ever paid for a piece of land in China.Also read: London's booming housing market pushes Telford Homes to expand It is the latest in a string of record-setting land sales in China's biggest cities, with the country's developers taking heart at what they see as a softening in the government's stance towards the property market.Over the past three years, the government has unleashed wave after wave of measures to rein in runaway house prices, but China's new leaders have desisted from any major new tightening move since entering office in March, fearful of further undermining already shaky economic growth."Since the middle of this year, developers have been getting a lot more bullish than before. They have been more concentrated in buying land in top-tier cities because they see more value there in the long term," said Du Jinsong, a property analyst with Credit Suisse.Also read: China mulls anti-dumping probe into luxury car imports from EUWhen the housing market has boomed in China in the past, land prices have risen strongly across the country, but in recent months there has been a bigger divergence between prime locations and more distant ones.Sun Hongbin, Sunac chairman, told China Business News in a recent interview: "The trend of the industry is that differentiation will be clearer and clearer, even the differentiation between different areas and different products within the same city."Also read: British Land to invest 470m in office-led Paddington estateNew home prices in Beijing rose 21 percent year-on-year in August, nearly double the national average increase of 11 percent, according to an index compiled by E-House, a Chinese real estate service provider.With this week's acquisition, Sunac acquired a piece of land that lies between the bustling Sanlitun neighbourhood and Chaoyang park, one of Beijing's bigger urban green spaces. Nevertheless, investors registered their concern that it might have overpaid by sending its Hong Kong-listed shares down nearly 6 percent.Also read: Mengniu Dairy seeks to rebuild reputation with Yashili stake deal"This is a bet by the developer that the housing market will continue to improve but that is a risky bet," said Mr Du. "The consensus view is that there will be no more tightening by the government. The reason why the government is not tightening so far this year is because the economy has been weak. With the economy beginning to gain momentum, there will be a risk of more tightening."A bigger-than-forecast jump in China's official purchasing managers' index, published on Sunday, has fuelled expectations that August's economic data, due to be published next week, will be stronger than previous months. Also read: Storms send Chinese on wheat-buying spree The Chinese economy slowed to 7.5 percent growth in the second quarter and many analysts had predicted a continued slowdown over the rest of this year, but some have started to revise up their forecasts in recent weeks. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
