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The new land king was auctioned in Xuhui District, Shanghai. Visual China/Photo

On August 7, 2024, Shanghai auctioned off a new land king. A residential land located in Xietu Street, Xuhui District was won by Greentown China (03900.HK) at a total price of 4.8 billion yuan, with a floor price of 131,000 yuan per square meter, breaking the national record of 100,300 yuan per square meter set by Ronshine China (03301.HK) in Shanghai in 2016.

According to information disclosed by the Shanghai Public Resources Trading Center, the land parcel for sale has an area of ​​about 17,000 square meters and the starting price has reached 3.696 billion yuan. This means that the floor price of the land parcel reached 101,000 yuan per square meter before the land parcel was sold, locking in the highest unit price in advance.

What does the reappearance of the land king after eight years mean?

Uneven heat and cold

"When it comes to this kind of good land in the city, it goes without saying that (developers) will compete fiercely for it." Lu Wenxi, chief analyst of Centaline Property, who has been paying close attention to the Shanghai property market for a long time, was not surprised that the land was sold at a high price.

He told the Southern Weekend reporter that the land was originally bought by Xiaomi Group in 2021 and was intended to be used to build its Shanghai headquarters. However, it was not developed afterwards and was put back on the market by the government. The land use was changed from commercial office to commercial housing, and the land price increased accordingly, which was twice the total price Xiaomi paid for the land.

The plot of land is located in a prime area with many luxury houses around. Some real estate tycoons in Lu Wenxi's circle of friends live there and "walk their dogs or go jogging when they have nothing to do."

Judging from the map, the land is located in the riverside area, which is a prime location where the Huangpu River flows through Shanghai's central urban area. It is also the core area of ​​Shanghai's urban planning central activity area. It is surrounded by real estate projects such as Huiyuan Xi, Hong Kong Land·Qiyuan, and Yujiangting.

According to Anjuke, most of these properties are large apartments of one to two hundred square meters, with an average price of around 150,000 yuan per square meter.

Song Yanqing, president of Rand Consulting, has had business cooperation with Greentown. In his opinion, the land that Greentown bought is not expensive and should be developed according to luxury housing standards in the future.

Song Yanqing told the Southern Weekend reporter that according to industry pricing standards, residential properties developed on such plots of land are usually sold at a price 25,000 to 50,000 yuan per square meter higher than the floor price. It is expected that Greenland's future selling price will be around 150,000 to 170,000 yuan per square meter.

Lu Wenxi introduced that this type of mid-to-high-end improvement housing is currently selling well. In particular, the transaction volume of luxury houses with an area of ​​144 square meters and a total price of more than 15 million yuan in 2024 is higher than the same period last year.

According to Phoenix.com, 23 high-end real estate projects with a unit price of over 100,000 yuan per square meter have been launched in Shanghai in the first half of 2024, with a total sales volume of over 100 billion yuan. A total of nearly 4,000 units were signed online, of which 1,544 luxury houses with a total price of over 30 million yuan were sold, setting a record high in the past decade.

This type of luxury home is mainly aimed at high-net-worth individuals whose purchasing power is less affected by economic fluctuations. On the contrary, purchasing high-quality properties helps to preserve and increase the value of assets.

In addition to the land king, Greenland also won another plot of land in Jiangwan Town, Hongkou District, Shanghai, with a total price of 1.2 billion yuan and a premium rate of 6.48%.

Lu Wenxi analyzed that most of the land currently reserved by Greenland in Shanghai has been developed and needs to be supplemented by land.

Song Yanqing said that when founder Song Weiping took the helm, Greentown had focused on quality, with its product line mainly focusing on mid- to high-end residential properties. After the central enterprise China Communications Construction Group took over, it was transformed into a mixed-ownership enterprise, and its operating conditions improved, which was able to support its acquisition of land against the trend.

According to Greentown's official website, as of December 31, 2023, CCCC is the company's sole shareholder, holding approximately 28.97% of the total issued share capital. The company's revenue in 2023 was 131.38 billion yuan, profit was 6.68 billion yuan, total assets were 535.54 billion yuan, and liabilities were 421.6 billion yuan.

"The situation is quite uneven now." Lu Wenxi said that the market for properties that meet basic needs and plots of land in average locations is still sluggish, the market is showing a trend of differentiation, and is still in a downward range overall.

On the day when Greentown won the land king prize, there were 4 other plots of land for sale at the same time. However, the quality was average, and there were problems such as remote location and old environment, so real estate developers were not very enthusiastic in bidding. Among them, only one company bid for 3 plots of land, and they were finally sold at the reserve price.

Return to the market

The record-breaking land price in Shanghai this time was also related to the adjustment of land auction rules.

On June 7, 2024, the Shanghai Municipal Planning and Natural Resources Bureau issued an announcement to cancel the 10% upper limit on the land auction premium rate, and there was no real estate linkage price setting in the announcement.

In order to curb the overheating of the real estate market, Shanghai has implemented a price limit policy, which started with the first batch of centralized land supply in 2021. In addition to the 10% premium rate cap, the average price of the land after it is developed into housing is also stipulated when the land is transferred.

The land king that Greentown bought this time is still subject to a premium rate limit. The Shanghai Municipal Planning and Natural Resources Bureau stated in an announcement that for plots in specific areas with high market popularity, differentiated regulatory measures must still be taken before they are sold, and when the premium rate exceeds a certain limit, the lottery stage will be entered to guide rational bidding.

The premium rate of the land auctioned by Greentown reached 30%, and it was finally won through lottery. Lu Wenxi introduced that Shanghai implements a policy for each plot of land, and there is still window guidance for the price of specific plots of land. "There is still a price limit. The previous price limit was 10%, and this time it is 30%."

However, according to statistics from the China Index Academy, as of June 7, 2024, 19 of the 22 cities that implemented centralized land supply have restored the "highest bidder wins" policy, leaving only Beijing, Shenzhen and Ningbo to implement the land price limit policy.

According to Economic Observer, in October 2023, the Ministry of Natural Resources issued a document to the natural resources management departments of various provinces and cities, proposing to cancel the land price restrictions in land auctions.

After the price limit was lifted, the land auction market heated up. According to statistics from the China Index Academy, starting from May 2024, the transaction area of ​​residential land in 300 cities across the country has increased for three consecutive months, and the unsold rate has declined, remaining below 10% for two consecutive months.

Among them, the Yangtze River Delta region is the hottest. According to statistics from the China Index Academy, in the first seven months of 2024, the average floor price of residential land in the Yangtze River Delta was 12,530 yuan per square meter, a year-on-year increase of 6.9%.

Meng Xinzeng, an analyst at China Index Academy, told Southern Weekend that in addition to Shanghai, in recent land auctions in key cities, the first residential land parcel with no price limit in Hangzhou's main city was sold at a premium of 40%, and the land parcel in Fenghuang Street, Gulou District, Nanjing was sold at a premium of 21%.

However, except for the Yangtze River Delta, the unit price of residential land in other regions has dropped year-on-year. There is no premium for the recent land transfer in cities such as Tianjin and Jinan, and most of them are sold at the reserve price.

The change in land auction rules means that the land price will be determined by market-based bidding, and real estate developers will have more room to adjust their selling prices. "Market matters will be returned to the market," said Lu Wenxi.

Southern Weekend reporter Wei Lincong

Editor: Feng Ye