Hong Kong-listed Future Land Development plans to sell high-end units at its new project in Shanghai’s Hongkou district for RMB 120,000 per square meter, representing more than a 20 percent premium over current selling prices in the area.
“There is no doubt the selling price will reach 120,000 yuan per square metre,” Wang Zhenhua, chairman of Future Land said at a conference this week that was reported by the SCMP. The current high price in Hongkou, which is just north of Huangpu district across Suzhou Creek, is RMB 98,000 per square metre, and Future Land hopes to start selling units in the project sometime next year.
Setting a New City Land Price Record
Wang’s announcement follows the developer’s purchase last month of the residential land plot in the Liangcheng area of Hongkou, when it outbid ten rivals to pay RMB 3.7 billion ($552 million) for the 19,959-square meter site — a 77.4 percent premium over the auction minimum, and a record high price per square metre for the city.
Although the purchase price translated to RMB 67,409 per square meter of gross floor area, the ultimate cost was closer to RMB 76,000 per square metre (US$1066 per square foot) given government mandates to devote a 20 percent of the project to affordable housing. Current average home prices in Hongkou are estimated to average RMB 70,000 per square metre.
Despite the seeming disconnect with current market conditions, chairman of Future Land Wang Zhenhua was confident the homes would sell, and unlike other pricey land deals in the city this year, some industry professionals support the deal.
“This seems to me a high but still reasonable price given the extremely limited land supply in Hongkou,” Lu Qilin, director of research at Shanghai Homelink Real Estate Agency told the Shanghai Daily. Lu noted that the Liangcheng area has not seen any new residential schemes in eight years and Homelink data indicated inventory of new homes in the neighborhood was one of the lowest in the city last month.
Future Land Expects to Exceed Sales Target by 30%
The Shanghai-based developer already paid RMB 7.6 billion in the first six months of this year for 14 parcels of land totaling 2.67 million square meters in several top-tier Chinese cities including Shanghai, Suzhou and Tianjin.
Future Land’s contracted sales reached RMB 28.05 billion in the same period and the developer expects its annual sales to reach RMB 52 billion this year, exceeding projections by 30 percent. Ouyang hopes to make Future Land one of China’s top ten developers by 2020, by pushing sales to RMB 100 billion per year by the start of the new decade.
High land prices have been a staple feature of the Shanghai real estate market, with sales totaling RMB 50.6 billion ($7.5 billion) in the first half of this year and 15 of the 30 plots sold fetching premiums double the reserve prices.