Attempts to rein in China’s real estate sector haven’t worked quite as the government hoped, as investors are scrambling for residential property ahead of a New Year’s deadline which will usher in stricter property rules. Speculation is likely to grow rampant as unbridled optimism permeates the market, while well-intended measures like the government plan to develop affordable apartments only fuel demand. See the following article from Property Wire for more on this.
Real estate developers in China are trying to outbid each other in a desperate attempt to buy up land for residential property before tough new buying rules come into force in the New Year.
In the latest bidding frenzy a new record was set for a 114,517 square meter plot in Shanghai when state owned China State Construction Property Company bought it for $545 million, some 217% more than the asking price.
With the Chinese government committed to trying to cool the country’s over heated property market there was a frenzied interest in the piece of land with all the major players bidding including Greenland, China Overseas Property, China Resources Land, Vanke and Gemdale.
This was despite the government’s new tougher property sales rules requiring buyers to put down at least 50% and pay off the outstanding amount within a year that come into force on January 1.
‘In order to complete land purchases before the rule takes effect many property developers have decided to buy more land which is making prices soar even further,’ said Chen Sheng, an expert from the China Index Academy, a property research organization.
Such high prices are a reflection of the confidence developers have in the real estate market for 2010.
Even the cooling measures will make them more eager rather than dampening demand, Chen said.
Although there will be price fluctuations next year, they do believe the market is bullish,” he said.
He pointed out that current government plans include the building of 1.8 million low rent apartments and 1.3 million state subsidized apartments in 2010 and that will make land harder to find.
Xue Jianxiong, an analyst with E-House (China) Holding, said rocketing land prices indicate housing in the area may have to exceed $7,321 per square meters to be profitable and the price surge will eventually affect neighboring areas.
‘As we have seen, the central government is working to take the steam out of the over-heated housing market. At this very juncture, developers and investors must take risks into consideration,’ Xue said.
Meanwhile the southern Chinese city of Shenzhen is looking at various measures to restrain speculation in its real estate market.
The city also plans to increase the supply of homes.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.