BEIJING (Reuters) - City authorities in Beijing have sold at a record high of more than 40,000 yuan ($6,300) a square meter in an auction where they capped the winning price to keep it from going too high.
Tuesday’s auction may fuel expectations that rising land costs will drive up home prices again, which in turn could make it harder for Chinese authorities to ease monetary policy to combat slowing economic growth.
Zhonghao Group, a private developer, beat about 10 rivals and bought the land in a heated auction for 2.63 billion yuan, a cap that local authorities applied to the sale, the state-owned Economic Information Daily reported.
The newspaper, run by the official Xinhua news agency, said the developer needs to build 16,400 square meters of “affordable homes”, which will be sold back to the local government for 10,000 yuan per square meter.
The other 61,600 square meters of the project will be kept by the private developer for selling at commercial rates. For that space, the developer paid an average of more than 40,000 yuan a square meter.
The plot is considered the last parcel in Beijing available for residential construction surrounded by apartments where the average sale-price is already more than 50,000 yuan per square meter.
The heated auction and record high price contrasted with an overall cool land market in the Chinese capital in the first half of 2012. In the second quarter, Beijing’s land revenue halved from the previous three months to only 4.8 billion yuan, according to the Economic Information Daily.
However, both land and home prices showed signs of a pickup more recently after China launched fresh measures, including two interest rate cuts in less than a month, to boost the slowing economy, and despite Premier Wen Jiabao’s reiteration that the government will maintain policies designed to cool property prices.
“At such a sensitive moment of China’s property tightening campaign, the (auction‘s) high land price reminds people of a big surge in home prices in 2010 after land cost hit record highs one after another,” the newspaper said.
A private survey earlier this month showed China’s average home prices snapped a nine-month losing streak and inched up in June.
Some developers are starting to replenish their land banks in markets where they have posted improving sales performance.
($1 = 6.3659 Chinese yuan)
Reporting by Langi Chiang and Kevin Yao; Editing by Richard Borsuk