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Supply Cools Housing Prices

While open bidding drove up Shanghai's land prices, mass supply has slowed new housing price hikes in some areas, business insiders said.

Songjiang District has already seen signs of saturation in its residential market.

Last year, it offered 25 plots for residential property development. Covering 3.41 million square meters, the plots accounted for nearly one fourth of the city's total land supply during the period.

Ten plots will be residential communities with construction area of more than 100,000 square meters.

Resulting from developers' pursuit of land reserve, the land prices were largely inflated.

According to the Shanghai Housing and Land Administrative Bureau, the average land prices surged 8.1 percent in Songjiang, from 740,000 yuan (US$89,156) per mu (667 square meters) to 800,000 yuan per mu, in the fourth quarter of last year.

In open bidding last month, the land prices there exceeded 900,000 yuan per mu. Shanghai Gold Bund Group spent 920,000 yuan per mu for a plot.

Separately, the government has reserved premium land for higher prices. Land along the railway transportation, expected in coming years, may be even more expensive.

"In an upward market, land simply means money for developers. As they are crazy for land recruiting, prices are bumped up," said Ji Baohong, general manager of Shanghai Wangyuan Real Estate Development Co Ltd.

Sufficient land supply, however, has curbed the new housing prices in Songjiang District.

Zidong Garden, for instance, saw its new housing prices edge up merely 1 percent, from 4,050 yuan to 4,100 yuan in the fourth quarter of last year. The growth rate was far lagging behind the city's average 8 percent.

"Many residential projects are put onto the market at the same time. That causes trouble in sales," said He Jiaxing, analyst of Huangdao Property Services.

At the beginning of this year, four new projects were put onto Songjiang's housing market. In the remainder of the year, ten or more will come onto the market in succession.

"With the same location and similar quality, price war is unavoidable for the property developers," He said.

Li Dong, of Shanghai Housing and Land Administrative Bureau, said that up to 80 percent of the new apartments are to be built in the suburbs, or the area along the Outer Ring Road and beyond it.

"This year, the city government will promote living in the countryside," Li said.

However, Ji noted that property in Shanghai's suburbs is most dangerous for investors, because supply has largely surpassed demand in the areas.

Shanghai will offer a total 2,500 hectares of land this year, compared with the 1,900 hectares leased since July, 2001.

(Eastday.com March 4, 2004)

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