Shenzhen Takes in RMB 22.4B From Biggest Day of Land Sales Ever

Shenzhen auctioned off five residential land parcels to a pack of 80 project-hungry developers on Monday, bringing in a total of RMB 22.4 billion ($3.2 billion) for southern China’s top tech hub.

The city’s first residential land sale of 2019 turned out to be its biggest of any year, as developers paid an average of 45 percent over the auction reserve prices to grab their pieces of the city bordering Hong Kong.

If the authorities had not capped bids at 45 percent above the reserve level, the city’s haul may have been still higher, as each sale reached the maximum level.

Logan Takes Top Plot in Home Town

Among the four score builders bidding for the 170,273 square metres (1.8 million square feet) of sites, Shenzhen-headquartered Logan Property Holdings bagged the most expensive piece of its home city. The developer agreed to pay RMB 6.6 billion for plot A817-0609 in the city’s Longhua district after 168 rounds of bidding. The 32,667 square metre site can yield up to 148,300 square metres of homes, with Logan paying the equivalent of RMB 44,403 per square metre of finished housing to acquire the land.

With all auctions attracting the maximum bids, developers were left to compete on the city’s secondary bidding criteria, the amount of affordable housing they would build on the site and transfer to the government free of charge.

Yuexiu Buys Piece of Shenzhen

Another Guangdong player, Yuexiu Property Co. paid RMB 5.9 billion for the second-costliest site, paying the equivalent of RMB48,702 per square metre for plot A122-0360 in Bao’an district.

The 38,880 square metre site purchased by the Guangzhou government developer is approved for construction of up to 121,310 square metres of housing, fetching the maximum bid just one year after becoming Shenzhen’s first plot to go unsold at a land sale.

China Overseas Land also picked up a site, shoving aside 12 competitors to win plot A510-0151 in Guangming district for RMB 5.408 billion.

The Hong Kong-listed company’s winning bid for the 46,019 square metre site entitles it to build 184,070 square metres of homes, which values the plot at RMB 29,380 per square metre of housing.

Max Bid Reached in 10 Seconds

Another plot in Guangming district attracted 23 bidders who pushed the bidding to the government’s maximum price within 10 seconds maximum set by the government within 10 seconds.

The 18,429 square meter parcel, which was the smallest in the batch and can be built out to 73,710 square meters, was snatched up by PowerChina Real Estate Group, a unit of state-owned hydropower firm PowerChina, which now has permission to build up to 73,710 square metres of homes after bidding RMB 2.01 billion, or RMB 27,296 per square metre, for the site.

A unit of Ping An Insurance Group’s venture capital arm paid RMB 2.47 billion for a site in Pingshan district which can yield up to 162,290 square metres of homes at a price per square metre of RMB 15,220.

Throttling Land Supply

Residential land has been scarce in the city of 12.53 million, where the booming tech sector continues to make Shenzhen a migration magnet. Between 2015 and 2018, the city government made available for tender to developers only 18 housing plots, according to data from Midland Realty.

This week’s auction was a test of developers’ financial resolve as they took on development risk for a chance to bolster their positions in the Greater Bay Area, which links 11 southern Chinese cities including Hong Kong into a megapolis with $1.5 trillion in combined economic output.

International capital has poured into real estate in Guangzhou and Shenzhen, two of the most important mainland Chinese cities in the Greater Bay Area, with RMB 7.5 billion of investments in the first quarter of 2019, topping the RMB 5.2 billion seen in the whole of last year by nearly half, according to data by Cushman & Wakefield.