Local governments in China favor letting the market determine real estate prices, except when it might become a hot topic at internal party meetings. This seems to be the message from the recent cancellation of an upcoming land sale in Beijing, where property prices are reaching record levels just before an important party meeting in March.
The city government officially suspended the bidding process for a site in its central business district, where office rental rates are now said to be the fourth-highest in the world.
Prices Potentially as High as RMB 80,000 Per Square Metre
Bids for the plot parcel on the financial centre of the capital’s downtown had been expected to set a new record for land prices in the city, with some reports estimating the winning offer could be as much as RMB 80,000 per square metre.
In a statement on a government website announcing the land auction, the starting price for the 20,664 square metre site was set at RMB 3.55 billion. On Monday of last week, however, the city land bureau “temporarily suspended the sale without explanation.
Despite the lack of transparency, observers in the capital were ready to speculate that setting a new record for land prices directly before a Communist Party meeting in Beijing was seen as potentially embarrassing to local officials. New policies set by the central government one year ago require local authorities to suppress speculative buying, increase land supply for housing and speed up the construction of affordable housing projects to rein in real estate prices.
Beijing Land Prices Among the Nation’s Hottest
A report in the Shanghai-based National Business Daily showed that Beijing planned to put 16 plots of commercial land measuring a combined 24,260 square meters up for auction during February. China’s capital sold off 26 plots of land during January, bringing in RMB 40.59 billion from property developers confident of their ability to make a profit from rising home prices.
Beijing’s land sales income hit a record 182 billion yuan in 2013, and the land markets in other top-tier cities, such as Shanghai and Shenzhen, are also red hot.
Data from CRIC, the research wing of real estate agency E-House, indicates that the average cost of built floor space in Beijing rose 31 per cent during January to RMB 13,400 per square metre.
Rare Downtown Residential Site
Whenever Beijing’s leadership does decide to put the CBD site, which is located in Hua Jia Hutong, up for sale, its status as the first plot within the city’s second ring road to be auctioned for residential purposes in nearly a decade makes a new price record likely.
A report in the Hong Kong press quoted Bei Fu, a real estate sector credit analyst at ratings agency Standard & Poor’s, as being sympathetic to the situation of the local government.
“The hot land market has put policymakers in a bind. The property market tightening measures in Beijing are the harshest across the country. Yet the outcome so far seems not to have been very satisfactory.”
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