September 21, 2016 / 6:15 AM / 4 years ago

Developer pays record price for land in southern China after bidding frenzy

BEIJING (Reuters) - A parcel of land in China’s southern manufacturing hub Dongguan sold for a record price after developers went into a bidding frenzy, the Shanghai Securities News reported on Wednesday, adding to worries the country’s property market is at risk of overheating.

Six property developers vied fiercely for the plot of land with a total area of 42,500 square meters (10.5 acres).

The winner, Times Property Holdings (1233.HK), became the new “land king” in the area by paying an all-time high of 12,517 yuan ($1,876.27) per square meter, five times higher than the starting price, the newspaper said.

A manufacturing hub in Guangdong province, second-tier city Dongguan has seen property prices rise sharply this year, partially due to its relatively close proximity to China’s tech hub Shenzhen, where undeveloped land is more scarce.

Data from the China Index Academy, a Chinese property research institute, showed that Dongguan was among the top 10 hottest markets in the country.

Prices rose 3.9 percent in August from July and were up more than 40 percent from the same period a year earlier.

On Tuesday, developers also paid higher-than-expected prices at a land sale in Hangzhou, undeterred by the city’s move just two days earlier to restrict home purchases to cool price rises, the National Business Daily reported.

The highest bidding price was more than three times higher than the starting price. Hangzhou was the host city of this year’s G20 summit and is a rising tech hub home to many tech firms such as e-commerce giant Alibaba.

“Such a high premium rate indicated that even with restrictions in place, property developers are still quite optimistic about Hangzhou’s housing market. At least they don’t think this round of restrictive policies would limit sales,” Ma Yingshu, general manager at the Hangzhou branch of real estate investment management firm CBRE China, was quoted as saying.

But Ma warned that risks of asset bubbles have been heightened by demand spilling over from some overheated second-tier cities to even smaller neighboring cities.

While the property market rally has provided welcome support to the slowing economy, Chinese policymakers have expressed concerns of late over rising debt and banks’ exposure to mortgages. The central bank’s chief economist has urged more steps to curb capital flowing into property.

Fears were mounting that Dongguan would become the next city to impose restrictions, according to media reports.

($1 = 6.6712 Chinese yuan renminbi)

Reporting by Yawen Chen and Kevin Yao; Editing by Kim Coghill

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