Learn mandarin - Don't hold breath for property supply drop

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BIZCHINA / Center

Don't hold breath for property supply drop

By Chen Weihua (China Daily)
Updated: 2007-06-26 08:28

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.

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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.

(For more biz stories, please visit Industry Updates)

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