Shanghai moves to bolster sagging land market

Shanghai continues to prop up its land market as China steps up efforts to boost the economy while the coronavirus outbreak wanes nationwide.

In the first quarter of this year, 50 land parcels totaling 4.75 million square meters in gross floor area were launched into the local market for sale, a year-on-year surge of 88 percent, according to data released by CRIC, a real estate data provider in China and a subsidiary of E-House China.

"Sentiment plunged in February but rebounded quickly in March when some 1.4 million square meters of land parcels were released, a month-over-month surge of 142 percent," said Martin Ding, chief executive officer of E-House (China) Enterprise Holdings Ltd. "And we expect the momentum to carry on with over 1.5 million, or even 2 million, square meters of land plots being introduced this month amid some positive signs sent by the local government recently to expand investment."

Last Friday, the city government rolled out a batch of measures that focus on major construction projects, expanding government investment, motivating social investment and improving the business climate.

The city, for instance, vows to accelerate the supply of land parcels, speed up the allocation and use of proceeds from land sales, expedite urban renewal projects and ease the burden on real estate developers by allowing them to defer payment of certain fees.

The move was immediately felt one day later when two residential parcels in Songjiang District were introduced for sale by the city's land watchdog, which had adjusted certain requirements for interested buyers.

For these parcels, developers could pay their deposits just one day before the bidding, rather than 20 days in advance to be eligible for bidding as previously required.

Moreover, companies won't be required to hold 15 percent of their total space. For several years, in almost all cases regarding residential plots, developers were only allowed to sell 85 percent of their total space on the open market.

"Local governments have stepped up land sales promotions possibly as a way to increase revenue sources as other sources are impacted by COVID-19," said James Macdonald, head and senior director of Savills China research. "As such they may have changed conditions to make land plots more attractive to potential buyers and achieve higher pricing."