The rush for land in China’s first-tier cities continues as Beijing-based COFCO Property Investment last week agreed to pay RMB 2.44 billion ($368 million) for a plot of residential land in Shanghai’s Pudong district. The price paid by the state-run firm represents a 235 percent premium over the auction minimum and is the second-highest premium paid in the city this year, according to a report in the Shanghai Daily.
In a sign of rising levels of competition for land, even around the periphery of China’s commercial capital, COFCO beat out 20 rivals for the 56,886 square-meter site in Xinchang township of Pudong. The deal by the property subsidiary of the mainland food-processing conglomerate is the latest in a series of blockbuster deals for suburban plots around Shanghai this year that have seen developers offer up to four times the government’s asking price for land at auction.
Shanghai Land Competition Continues
COFCO Property’s bid is equivalent to RMB 35,744 per square meter of gross floor area although, like other recent land deals, government restrictions are set to drive costs up as the developer is required to construct public service facilities and commit five percent of homes built as affordable housing schemes.
In the end, COFCO’s actual costs are projected to reach RMB 38,000 per square metre of gross floor area. Prices for finished housing in the Xinchang area have not surpassed RMB 30,000 per square metre, according to government figures.
Despite warnings from analysts of another round of tightening measures from the government in China’s major cities, developers have been paying huge premiums for land plots around Shanghai in recent months after average housing prices in the city rose more than 33 percent in the last year.
State-Run Firms Dominate Record Bids
In May state-owned Poly Real Estate paid RMB 5.45 billion (US$834 million) for a 69,433-square-meter site in the outlying town of Zhoupu — paying more than four times the auction minimum after outbidding 30 rivals for the project.
And just last month state-backed home builder Cinda Real Estate purchased a plot of land in Shanghai’s Baoshan district for RMB 5.8 billion ($870 million) — a 303 percent premium over the auction minimum.
Data from Hong Kong-based Centaline Property indicated about 200 land parcels purchased for RMB 1 billion or more had been sold nationwide as of June 28th, up from 110 parcels in the first half of 2015.