China Railway Construction Stars as Beijing Sells Trio of Sites for RMB 7.9B

Restrictions on China’s real estate market have not completely snuffed out developer demand for new sites, as Beijing last week successfully sold a trio of suburban land plots, fattening the city’s coffers by a total of RMB 7.95 billion ($114.72 million), according to local media reports.

All three of the projects sold were in locations far from the capital’s core districts as restrictions on sales of pricey homes and tightening credit have combined to dampen enthusiasm among builders for purchases of the most expensive sites in China’s first tier cities.

Industrial Park Home Sites Won After 55 Rounds of Bidding

A pair of sites included in last week’s tenders, designated as X89R1 and X89R2, are located in Beijing’s Economic-Technological Development area, 16.5 kilometers southeast of Tiananmen Square. Hong Kong-listed cement-maker-turned developer BBMG Group fought it out against a joint venture between government-backed mainland firms China Jinmao Holdings, China Railway Construction Corporation and Hong Kong-based, Shenzhen-backed RK Properties, according to local media accounts.

After 55 rounds of bidding, BBMG Group won the 38,121 square meter X89R1 site for RMB 3.32 billion at a premium of 24.34 percent over the auction’s starting price, while the Jinmao, China Railway Construction and RK Properties joint venture agreed to buy the 44,933 square meter X89R2 plot for RMB 3.7 billion at a premium of 17.46 percent.

Public records show that the pair of plots are categorized as R2 residential plots, destined for condo developments. However, the completed units on the two sites are required by the local government to sell at an average of not more than RMB 52,695 per square meter, with a maximum unit price of RMB55,330 per square meter.

China Railway Corp Takes Western Beijing Site

The third site, designated as 01-0010, 0021R2 and 01-0015B4, is located in southwestern Beijing’s QingLong County in Fangshan District, close to the Sixth Ring road and neighboring Qinglong Lake and the Chongqing Reservoir.

Won by the China Railway Construction Corporation for RMB 925 million at an average price of RMB 13,110 per square meter, the 54,533 square meter, mixed-use site is divided between two residential plots with a total 41,219 square meter that can yield up to 49,254 square meters and a 13,314 square meter commercial plot. The completed residential units are required to sell at an average of not more than RMB38,081 per square meter, with the maximum unit price set at RMB 39,985 per square meter.

The same site failed to fetch a buyer in an April auction, where it had been packaged together with an additional set of plots totalling 33,497 square meters and designated for commercial usage and car parks. That land package was put together for a public tender along with the site purchase last week, with a combined bidding price starting at RMB 1.63 billion. The additional commercial and parking sites, plots 01-0027, 0028B4 and 01-0032S4, were left out of the latest auction.

Beijing Cut Land Sale Calendar in Half for 2018

Public documents from the Beijing Land Reserve Center show that the city is scheduled to auction off a total of 37 residential sites in 2018, compared to 78 last year, with a combined planned construction area of 4.45 million square meters.

For the year to date, 28 residential sites, 8 commercial sites and 8 industrial site were sold at an average premium of 15 percent, earning the Beijing municipal government  total land transaction fees of RMB 99.54 billion, although the number has presented a year on year decrease of 49 percent.

In July, Shanghai cancelled four planned land sales worth a total of more than RMB 5.41 billion ($796.4 million) in less than a month, as tighter credit conditions were making it more difficult for developers to purchase sites, at the same time that stricter enforcement of home purchase restrictions were cutting the growth rate of new home sales. The measures, however, have not slowed down the pace of the largest developers, such as Greenland and Vanke, as these better funded builders exploit the period of low demand to expand their land banks.

The government’s bid to cool down the property market began late last year when President Xi Jinping insisted at the 19th Party congress that houses were “for living, not for speculation.” Real estate buyers in over 50 major cities across China were hit by higher mortgage down payments on top of increased interest rates, as well as price intervention by central authorities.