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Land Supply Still Fails to Satisfy Big Demand
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A further 20 plots of land covering 177 hectares were recently put on the market by the Shanghai Land Bureau, the second package it has made available this year.


These 340 hectares are the only publicly traded land to be put on the market in the city this year, despite a municipal government document stating last month that the figure for the whole of this year should reach 1,500 hectares.


No publicly traded land is coming on the market in key downtown districts such as Huangpu, Jing'an and Luwan, while suburban districts such as Fengxian and Jiading are dominating the bidding process.


But developers remain focused on the few downtown lots such as a 1.4-hectare tract in Huaxin Street, Changning District, which will be used for offices and retail outlets.


With its base price reaching 1.2 billion yuan (US$151.9 million), a tract of land in New Jiangwan City has attracted the interest of dozens of large domestic and foreign developers and is expected to become Shanghai's most expensive plot of land.


Developers also hope to find some clues about up-and-coming areas from the allocation of these lots. The largest tract of land available in this round of bidding is 31.77 hectares in Lin'gang New City, signalling the development of this new region neighboring Shanghai Yangshan Deep Water Port.


According to the bidding documents, all land used for housing must abide by the central government's "90/70 requirement," which means homes of less than 90 square meters must account for at least 70 percent of the residential project.


Although the supplies put on the market over the past couple of months may go some way towards quenching developers' thirst for land, experts believe that this is still not enough to satisfy the massive need for decently priced plots in good locations.


"Land supply has reduced since 2001. Though the government has increased land supply over the past two months, it is still less than market demand," said Jim Yip, director of the investment department at the Shanghai Office of Debenham Tie Leung (DTZ), a leading international property consultant.


According to Gong Min, a senior property researcher at Centaline Property Agency's Shanghai office, "this year's publicly traded land supply is very likely to be less than that of 2005 and 2004."


Last year, 125 plots of land, measuring 697 hectares, were sold through open bidding, while 81 plots of land covering 490 hectares were publicly traded in 2004.


"This year's shrinking of the land supply via open bidding is probably due to the influence of the central government's macro-control measures, including tighter restrictions on land usage and the stricter regulation of open bidding," said Gong.


In 2002, the central government introduced public trading for commercial land for retail, tourism, entertainment and residential purposes.


"The traditional practice of trading commercial land privately through contracts between the government and developers has gone," said Zhang Xiaolong, a researcher at the Shanghai Office of Colliers International Property Services.


Since August 31, 2004, when all local governments were required to unconditionally adopt open trading for commercial land, supply shortages have surfaced and become common in major property markets such as Shanghai and Beijing.


This shortage has pushed up the bidding price for lots in good locations.


Last month, Shanghai witnessed a bid of almost 6 billion yuan (US$759.5 million) for a plot of residential land in the city's Pudong District.


"Non-local developers have a very great need for land in Shanghai, especially those located in downtown," said Yip.


"I reckon that most of the newly added supply of 40 land lots will finally be acquired by local developers," said Solo Cheung, marketing manager of Orient Overseas Real Estate Group, a Hong Kong-based developer.


Cheung believed that this will be due partly to the central government's latest curbs on foreign investment.


The bidding document required foreign developers to have been doing business in China for at least one year.


(China Daily November 14, 2006)


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