Two Suzhou Land Plots Fetch $753.7M As Second Tier Cities Heat Up

Last week it was Nanjing bringing in a staggering $6 billion in land sales. This week it’s Suzhou’s turn to make some noise after Yanlord Group acquired two land plots in the city for RMB 3.7 billion ($753.7 million) at an auction.

The acquisitions by the Singapore-listed builder mark the latest bet on projects in second-tier cities as home purchase restrictions in China’s first-tier metropoles have piqued investor interest in nearby property markets.

Just over a week ago, Hong Kong-listed Times Property Holdings paid a record RMB 12,517 per square metre for a site in Dongguan, near Shenzhen, and earlier that same week Greenland Group paid over RMB 8 billion for a site in Nanjing — just up the road from Suzhou by high speed rail.

Caps and Curbs in Place to Slow Down Suzhou Prices

Rising land and home prices in the Shanghai suburb come at a time when the local government has been looking to bring some calm to both. In May, the Suzhou government limited the highest bidding price developers could offer at land auctions.

Some auctions in the city 25 minutes west of Shanghai by high-speed train were even called off earlier this year after authorities decided that developers had “overbid” for sites, with the local government later setting price ceilings on land sales — a move which has since been replicated in other Chinese cities at the urging of the central government.

The land premiums are a reflection of Suzhou home prices, which were up by 64 percent in June when compared to a year earlier, data from China Real Estate Information Corp revealed. In August, the local government increased down payment requirements to 50 percent for those buying a second home and put restrictions on non-resident buyers in place to help stabilize home prices in the city.

The measures had some impact on buyer sentiment, with home prices in Suzhou falling 0.25 percent in August from the previous month, according to research from the China Index Research Institute.

Yanlord Maintains Second Tier Focus

The Suzhou land acquisition is the Singapore-listed developer’s second foray into the city this year. The high-end residential builder reached an agreement to acquire a 30 percent stake in Ping An-subsidiary Shenzhen Lianxin Investment Management, which holds a 3.2 million square foot (297,289 square metre) residential site in Suzhou’s Gusu district, in July.

According to a statement filed on the Singapore Exchange, Yanlord purchased the land through its wholly owned subsidiary, Nanjing Renyuan Investment which was formed in 2013. The plots are 106,232 square metres in total with one situated in Suzhou’s Gusu district and the other located in the city’s Gao Xin district.

The developer already has a number of projects in the city including Riverbay Gardens, which during its recent launch sold 94 percent of its available units, bringing in a total of RMB 1.264 billion ($189.5 million), according to the SGX statement.

In June, Yanlord had agreed to team up with China Merchants Property Development and Poly Real Estate to purchase a housing site in Nanjing for RMB4.8 billion ($719.5 million).

Most recently, the mainland developer revealed it had invested RMB 64 million ($9.5 million) into a mixed-use project being developed by China Resources Land in Zhongshan, Guangdong province.