A joint effort by China Vanke, the country’s largest developer and Cinda Real Estate, a developer belonging to one of the country’s biggest asset managers, beat out 17 other bidders last week to offer RMB 12.3 billion ($1.87 billion) for a plot of land being auctioned in Hangzhou.
The eye-popping price for the land, which could yield more than 570,000 square metres of built area, was the largest amount paid for any site in China so far this year, and reflects the stunning rebound in Hangzhou’s housing market, which was once among the most troubled in the country.
Even more surprising, however, was when Vanke withdrew from the joint venture almost immediately after the winning bid was announced, according to reports in the local press.
Vanke Crashes Through Its Own Ceiling
Immediately after being crowned China’s newest land king, the title given to buyers of China’s most outrageously priced plots, Vanke apparently backed out of the binding bid in the public auction. Company insiders who spoke with the local press indicated that the price of the land, which was the first time that a parcel sold for over RMB 10 billion in the capital of Zhejiang province, exceeded the internal bid ceiling that Vanke had set before the auction began.
Bids were submitted in writing, and the company gave no explanation for its withdrawal. When the auction documents were filed with city authorities, only Cinda’s name appeared as the buyer, and Vanke officials are said to have asked staff members to delete any mention of the land acquisition from their WeChat accounts.
During the bidding process the price for the mixed-use site, which is located on two subway lines in Hangzhou’s Binjiang district, climbed by 95 percent over the auction starting price of RMB 6.29 billion.
Cinda Expecting Big Things in Hangzhou
Cinda, which is now said to have partnered with local Zhejiang developer Hangzhou Bijiang Real Estate on the project, is paying RMB 21,576 per square metre of built space for the land, and some experts estimate that, in order to turn a profit, the joint venture will need to sell apartments in the project for RMB 65,000 per square metre.
During 2015, according to public records, only two apartments in Hangzhou sold for more than RMB 60,000 per square metre, with the most expensive selling for RMB 69,525 per square metre.
From January through the end of March 2014, Hangzhou saw housing prices drop 11.3 percent and sales volumes plummet by 37.8 percent, according to official government statistics. Just two years later, however, the city is back in full swing. Hangzhou residential home prices jumped 3 percent in May compared to April, the 13th consecutive month of price gains in the city.