Big city land-grab sowing seeds of next China property boom
By Xiaoyi Shao and Sue-Lin Wong
BEIJING (Reuters) - In the Chaoyang district of northeast Beijing, a nondescript wall covered in patriotic posters protects one of the city's most valuable treasures: a dirt field containing nothing but a few scattered trees.
Last month the block sold for 3.3 billion yuan ($515 million), according to Beijing Municipal Bureau of Land and Resources data, meaning the cost to the developer of each apartment built will be above the price at which nearby homes currently change hands, once a commitment to build a quota of affordable housing is factored in.
"The flour is more expensive than the bread," said Guo Yi, market director at Yahao, a real estate consulting agency in Beijing, using a Chinese proverb to describe how undeveloped land in some prime locations has become more expensive than second-hand apartments. "We see increasing risks."
Such speculative pressure underlines a growing distortion in China's housing market.
While property prices in much of China are still falling, a rebound is under way in the biggest cities, bringing with it the return of land speculation that could stoke another bubble and widening the economic gap between "tier 1" centers and the rest.
In the Chaoyang project, the winning developer, a joint venture between Poly Real Estate Group and Beijing Capital Development, agreed that more than half the housing on the site would be built under a government affordable housing scheme.
The scheme aims to allow more of China's middle and lower income households to share the dream of owning their own home, but also makes the project more expensive for the developer.
Analysts said the 41,964 sq meter (451,697 sq ft) plot equated to a maximum 117,498 sq meters (1,264,738 sq ft) of apartment space, meaning the developer was paying 28,086 yuan per sq meter, rising to more than 60,000 yuan per sq meter when the cost of building the affordable housing was included. Continued...