Chinese developers engage in intense bidding as Shanghai’s first land sale of the year gets under way

Shanghai’s first land sale of the year got off to a solid start as developers’ confidence and risk appetite were bolstered by China’s strong first-quarter economic growth and access to easier credit.

A total of 19 plots measuring 944,200 square metres (10.16 million sq ft) will be auctioned during the four-day sale that ends on Friday.

The first five plots sold on Tuesday witnessed furious bidding at the Shanghai land authority’s office in Pudong New District, with some fetching as much as 10 per cent above their reserve prices.

The first plot was snapped by a consortium of state-owned Zhejiang Communication Investment Group and the real estate arm of state-owned Xiamen Xiangyu Group, which competed with 10 other bidders for 55 rounds.

The land in the city’s northwestern Putuo district attracted interest from major developers such as China Overseas Land and Investment, China Resources Land and Poly Development. It was eventually sold for 3.8 billion yuan (US$552.3 million), or 44,450 yuan per square metre, almost 10 per cent higher than the floor price.

The bidding was equally intense for the four other parcels. A parcel in Jingan district, in the heart of Shanghai, was won by state-owned Yuexiu Enterprises (Holdings) for 67,936 yuan per square metre, or 7.5 per cent higher than the reserve price.

“Developers are keen to allocate their resources in major cities like Beijing, Shanghai and Shenzhen as we expect a recovery of the housing market to be first seen in big cities,” said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institute.

The auction of the 19 plots, the first in China’s financial capital this year, is more than three times bigger than the Shanghai government’s last round of sales in 2022.

Yan expects the Shanghai government to auction more plots over the course of the year, and expects them to fetch much higher premiums.

Housing sales have shown signs of a turnaround this year after policymakers loosened their grip on the industry by removing purchase restrictions and cutting mortgage rates.

China’s home price rebound extends into March after unprecedented relief measures

New home prices rose for the second straight month in March, after increasing for the first time in 18 months in February, the latest data from the National Bureau of Statistics showed on Saturday. New-home prices in Beijing, Shanghai and other first-tier cities rose 0.3 per cent in March from the previous month.

“Purchasing power isn’t a problem, but the key is confidence,” said Liu Qinghai, an analyst at Tianfeng Securities. “The rebound in sales would be sustainable when there is increasing willingness among residents to purchase homes.”

Investment in property development in China declined in the first quarter of 2023, extending a year-long slump as developers slowed down the pace of new-home construction despite a jump in sales, indicating that recovery for the vast and economically crucial market remains fitful.