Vanke, China Resources Buy New Shanghai Sites as City Sells $2B in Land

The suburbs of Shanghai saw nearly RMB 13.05 billion ($1.99 billion) of residential land change hands this past week, as the city seeks to boost new apartment supply to bring relief to its housing-hungry population.

The nearly two billion dollar set of land sales follow just one month after the Shanghai city government sold a pair of residential plots in Jiading and Pudong in late July for a combined $171 million.

The surge in supply of land for housing could give hope to homeowners looking for an opportunity to get on the housing ladder in China’s commercial hub, while providing the city government the chance to cash in on continuing demand for new homes in Shanghai.

Providing for More Than 290,000 New Suburban Homes

Two of the land plots sold by tender on Thursday would provide for construction of up to 290,000 square metres of new homes.

Shenzhen-based China Vanke, the country’s second-largest developer by sales, purchased the pricier of the two plots in the town of Anting, Jiading district for RMB 4.89 billion ($744.7 million), according to local property portal Guandian. The site on the outskirts of Shanghai, bordering the city of Kunshan, has a maximum construction area of 195,100 square metres, equating to a price of RMB 25,000 ($3,810) per built square metre.

On the same day, state-owned China Resources (Holdings) scooped up a residential plot in Nanqiao New Town in Fengxian district for RMB 2.19 billion ($333.9 million). The site in the south of Shanghai has a maximum construction of 94,700 square metres, which works out to RMB 23,000 ($3,505) per square metre of housing.

Under the land transfer agreement, five percent of the construction area of the land plots will be earmarked for low-income housing, and 15 percent will be set aside for permanent rental housing that is not for sale, as part of the municipal government’s housing affordability drive.

Shanghai Aims To Be More Affordable

Shanghai has been stepping up the development of leased apartments as the city’s authorities aim to add 1.7 million units of new homes during the period 2016 to 2020, including 700,000 apartments for lease. The plan, released in early July, calls for 60 percent more new apartments than were built in the 2011 to 2015 period.

Under the plan, about 5,500 hectares (55 square kilometres) will be set aside for residential development, up 20 percent from the previous five-year plan. Shanghai is targetting denser, more affordable housing for the masses as it seeks to rein a residential bubble that saw home prices jump 26.5 percent year-on-year in 2016.

The municipal effort is part of a broader national drive to ease China’s housing shortage in cities with large population inflows. On Monday the country’s land ministry announced a pilot program in 13 major cities, including Shanghai, to build residential properties for leasing on rural land.

Vanke, China Merchants Shekou Buy in Baoshan

In addition to the Jiading and Fengxian parcels, two other residential plots changed hands in an under-construction suburban industrial park the same week. Vanke and Shenzhen-listed China Merchants Shekou Holdings picked up the pair of sites in the Shanghai Northern Suburb Future Industrial Park in Baoshan district for a total price of RMB 5.97 billion ($910.5 million), at an average floor price of RMB 20,000 ($3,049) per square meter.

A joint venture between the government’s of Shanghai’s Pudong and Baoshan districts, the RMB 13 billion ($1.87 billion) industrial park will be home to more than 88 science and tech enterprises upon its slated completion around 2022.

Land sales in 300 major cities across China totalled RMB 1.84 trillion ($278 billion) in the first seven months of the year, growing 43 percent year-on-year and surpassing the 32 percent growth seen last year, according to data from China Index Academy.