To find out if land prices are driving up property prices, all
you need to do is look at the bidding for a plot of land in
Shanghai last Thursday.
The Greentown Real Estate Group from East China's Zhejiang
Province paid 1.26 billion yuan for a 59,253-square-meter plot in
the city's northeast new Jiangwan area.
That's an average floor space price of 12,500 yuan per square
meter, excluding construction and other costs.
It is the highest land price recorded in the area and it is
twice as expensive as another neighboring plot bought by China
Resources last year.
Greentown Real Estate beat out rivals such as Wing Tai and
Capital Land from Singapore, Orient Overseas from Hong Kong and
Vanke and Gemdale from the mainland.
While some people may still blame Tomson Riviera, the most
expensive apartment complex in China, for driving up housing
prices, it is believed that last week's bidding will ignite another
round of price hikes.
The limited supply of land in downtown Shanghai propelled
developers to fight viciously for the Jiangwan plot last week.
Their fervor is fueled by speculation that land prices are only
going up.
It's estimated that the property built on the Greentown land
will be sold for at least 22,000 yuan per square meter, compared
with the average 15,000 yuan selling price in the area now.
While the price hike will be a big headache for home-buyers and
possibly the developer, which has yet to find a way to sell it, the
local government, which auctioned the land, is the largest
beneficiary.
It's true that land price is not the only reason for rising
housing prices, but it is surely an important driving force.
So as long as local governments that control scarce land
resources remain interested in raking in profits from selling them,
lower housing prices will remain wishful thinking.
(China Daily June 26, 2007)