Land values up as developers target growth
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China's land prices are picking up again as more property developers step up their expansion in the land market, indicating their confidence in next year's housing sector and public expectations of further growth in home prices.
According to Centaline China, a leading real estate brokerage company, the land income in 12 major cities it monitors climbed 28 percent year-on-year to 700 billion yuan ($104 billion) by mid-December.
Beijing municipal government's land income this year is expected to rise more than 50 percent on the previous year to exceed 150 billion yuan, of which Citic Group bid 6.3 billion yuan for an 11,478-square-meter site in the capital's central business district.
In Guangzhou, land value for each unit of floor space hit 20,605 yuan a square meter last week, while the price in Wuhan hit a local record of 8,755 yuan a sq m.
Figures from Centaline show that 10 leading property developers have invested 14.8 billion yuan to grasp land parcels in the first 16 days of this month, compared with 21 billion yuan in November.
The Ministry of Land and Resources said it was aware of high land prices in some areas in November as competition increased. Soaring land prices also make institutional investors hesitate.
"We are looking for opportunities but we are not in a rush to make an investment right now," said a managing director of a US-headquartered private equity firm.
Wu Tao, managing director of Wins Investment Management Co Ltd, said the company would look for investment opportunities in second- and third-tier cities as land prices in first-tier cities had recently exceeded the company's expectations.
The company, which is 100 percent owned by Gemdale, a leading property developer based in Shenzhen, currently manages a joint venture real estate fund with UBS and a yuan-denominated fund.
"It is still questionable if the government will make more land available for commercial residential housing next year. Such an expectation would encourage more real estate companies to seize land parcels for future development, thus pushing up land prices and house prices," said Wu.
According to China Index Academy, a Beijing-based property research institute, the price of property in China will continue to rise in 2011, but the growth rate will slow.
"We expect house prices to increase by 8 to 9 percent next year. The area sold next year will increase by 8 to 10 percent," said Huang Yu, vice-president of the China Index Academy.
House prices in 70 Chinese cities climbed 7.7 percent in November from a year earlier, the slowest pace in 2010.
"Clearing up land parcels and making them ready for development is usually a time-consuming process and requires a large amount of money, therefore it is not easy for local governments to meet their land supply target," Wu added.
According to the Ministry of Land and Resources, the nation's land supply rose 48 percent to 128,200 hectares in the first 11 months of this year, while sites for residential developments increased 51 percent.
Due to expectations of a strong yuan and a prospering property market, more overseas money is flooding into the country's already sizzling real estate sector.
Foreign investment in China's property sector rose 48 percent to $20.1 billion in the first 11 months, the Ministry of Commerce said on Dec 15. This is almost three times the 17.7 percent increase in the country's total overseas capital inflows.
To curb the trend, the Ministry of Commerce ordered local authorities to halt the approval of some foreign property investments to stop speculative purchases, it said in a Nov 22 statement.
Meanwhile, local authorities are also required to strengthen their reviews of foreign exchange inflows for real estate transactions and documentation for land rights, according to the statement.
