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Hong Kong’s New World Development Takes Advantage of Hangzhou Land Price Curbs
en.hangzhou.com.cn  2019/08/01 16:06  SCMP

Hong Kong property company New World Development took advantage of a newly introduced price cap to win a commercial-residential plot of land in downtown Hangzhou for 9.8 billion yuan (US$1.4 billion), a shade higher than the starting bid of 9.6 billion yuan, it said on Tuesday. The deal represents New World’s first foray into Hangzhou.

The 93,364 square metre plot, the latest among nine sites the Hangzhou government is offering during a two-day auction, was also the first to be sold under the newly introduced price cap.

The city of Hangzhou in China’s eastern Zhejiang province is selling land for as little as only 4 per cent above starting bids, as it works to keep prices down and cool its housing market.

The city has sold more land than any other mainland Chinese city since 2016. In the first half this year, it sold 148 plots worth 142 billion yuan, about five times higher in terms of value compared with similar sales in Shenzhen, the technology hub home to Huawei Technologies, and 51 per cent higher compared with the national capital, Beijing.

Under the new rules, the plots on offer come with limits on premiums that can be paid on tenders, the maximum price developers can charge for finished homes built on the land, as well as on how much they can charge for finished interiors, as part of the sales conditions. For instance, New World Development cannot charge more than 76,180 yuan per square metre for a finished home built on the plot of land it has won.

Six sites sold on Monday did not reach their capped tender prices, with final prices ranging from 9 per cent to 28 per cent higher than starting prices.

“Only by preventing the price of land from going up can home prices be stabilised, something the central government has highlighted from time to time,” said Yan Yuejin, research director at Shanghai-based property services company E-House China R&D Institute. “No single city would like to stand out in land sales under such circumstances, as this might attract criticism from the central government. Hangzhou is not an exception.”

Hangzhou, the hometown of South China Morning Post parent Alibaba Group Holding, will host the 2022 Asian Games.

Beijing has sent clear signals it wants to limit real-estate prices in spite of an economic slowdown in mainland China, tightening credit available to developers over the past few months. This has forced companies to deleverage and chase fewer plots of land.

“The central government is rather determined about not letting money flow into property, in particular when trade talk with the US are on the right track,” said John Lam, head of Hong Kong and China real estate research at UBS. “Loans for land purchases will be more difficult for builders to come by, in the future.”

In May, the China Banking and Insurance Regulatory Commission banned direct financing to developers who had not secured all approvals necessary for starting construction, or those who had not secured all funds needed for a project.

This month, the National Development and Reform Commission said any new offshore bonds issued by real-estate companies must be used only to replace medium and long-term offshore debt maturing in the following year.

Previously, developers could use offshore debt issuances to refinance existing debt, both onshore and offshore, and for general purposes.

Author: Editor:Wang Yueyun
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