Shanghai Sees Record Prices for Land and Homes This Week

In a sign that China’s real estate downturn isn’t being felt the same way in every location, the country’s commercial capital this week saw a record price paid for a land parcel at almost the same time that a developer gained permission to sell new homes for a previously unseen RMB 300,000 ($48,400) per square metre.

According to a report in the Wall Street Journal, Hong Kong-listed developer Lai Fung Holdings is China’s new land king, after successfully bidding RMB 577 million ($92.98 million) for a prime parcel of residential land in central Shanghai’s Huangpu district.

The 6,885 square metre site has a buildable area of 9,639 square metres, and 30 percent is required to be set aside for affordable housing, and another two percent for public facilities, which means that the developer paid the equivalent of RMB 85,810 per square metre for the land.

Lai Fung is perhaps best known in Shanghai as the developer of Hong Kong Plaza on the city’s Huaihai Road, as well as Mayflower Plaza near Zhongshan Park.

New China Record Land Price

Lai Fung’s purchase outstripped the RMB 42,821 (US$6,900) per square metre that Singapore’s Wing Tai Group paid for a site near Xintiandi in Shanghai last year, and even surpassed the RMB 73,000 ($11,764) per square metre that Sunac Holdings paid for a site in Beijing last year, to set a new national record for China.

Before recalibrating all of your investment assumptions, however, please keep in mind that while the price paid per square metre for the Huangpu site was high, the total amount paid was still less than $100 million, which could mean that this transaction is more of an anomaly than a trendsetter.

New Record Home Prices in Shanghai

Perhaps a clearer sign of the enduring strength of Shanghai’s housing market is the revelation this week that a Shenzhen-based developer has gained permission from the city’s housing authority to begin selling homes for as much as RMB 298,000 ($48,100) per square metre.

According to a report on real estate website Soufun.com, Shenzhen Overseas Chinese Town Co. (000069) has been granted permission to start selling the properties this month.

The new record asking price for homes in Shanghai also came during the same week that the Beijing city government granted Poly Real Estate Group the right to begin selling luxury apartments in China’s capital for RMB 100,000 ($16,100) per square metre.

Poly’s Beijing deal also set a new record asking price for housing in the city, and was only allowed after the Beijing government waived an existing ban on pricing new housing projects at over RMB 40,000 per square metre. The ban had been put in place last November to help tamp down housing prices and cut developers’ appetite for new land.

Some analysts are speculating that the new record asking prices in Shanghai and Beijing indicate that the city governments have lost their fear of runaway housing costs, and they at least show that China’s developers have not lost their optimism.