Really? March land prices said to decline in 70 major cities

10:53, April 14, 2010      

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A report on average land prices in 70 cities has led to some head scratching after it showed prices declined in March, though expensive land has been largely identified as the cause of soaring housing prices.

The average floor price in 70 cities including Beijing, Shanghai, Shenyang and Luoyang was 1,868 yuan ($273.66) per square meter in March, a decline of 20 percent over the previous month, according to the report by the China Index Academy (CIA), a domestic property research institute.

But Beijing's plot prices still soared to 15,094 yuan ($2,211) per square meter, an increase of 89 percent over the previous month, making it "the only city whose land price went up obviously," the CIA reported.

Land in Shenzhen, Chengdu and Shanghai sold at prices very close to what local governments had originally put plots on the market for, meaning developers didn't bid up. "The developers had less enthusiasm in acquiring plots, because the central government's adjustment policies have taken effect," the CIA commented in its report.

Some central media, including the official Xinhua News Agency, published editorials recently criticizing local governments for deriving a high percentage of their fiscal revenue from the sale of land, which the media outlets said was the main cause of the overheating in the property market.

And a number of analysts, including Li Zhanjun, director of the E-house China R&D Institute, attributed the higher home prices to increased plot prices.

The home price index for Beijing, Shanghai, Shenzhen, Tianjin and Guangzhou increased 2 percent in March over the previous month, according to data released by Centaline China Property Research. YouWin Real Estate Research Center (Shanghai) also reported the average price of new housing in Shanghai reached 19,767 yuan ($2,897) per square meter, a 48 percent increase year-on-year, and a 0.37 percent rise over the previous month.

"High plots cost is of course one of the major causes of increasing home prices, but residents' demands including purchasing houses for self-use or for speculation are also decisive in the uncontrollable prices," Liu Yuan, a senior research manager at the Centaline China Property Research Center, told the Global Times Tuesday.

"Take Shanghai for instance: A large amount of home transactions were attributed to investment demands, so long as there is a strong demand, the home price will probably not decline," he said.

"We should not just see the data in one month. We need to see what happens in a longer term because it takes time for developers to finish buildings," Liu said. "The average price also depends on where the 70 cities' plots are distributed, in central districts or in suburban areas."

Source: Global Times


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