Home builders have been on a spending spree on land in the nine mainland cities of the Greater Bay Area, a show of confidence that analysts say is likely to prop up house prices in the future economic hub.
Developers forked out 82.5 billion yuan (US$12.59 billion) to acquire land in the first three months of the year, 40 per cent more than in the same period of 2020, according to data from the China Real Estate Information Corporation (CRIC). It is the highest amount spent on land there since 2014.
A total of 114 plots were sold in the nine cities in the three months ending March. The southern Chinese cities in the bay area include Shenzhen, Guangzhou, Dongguan and Foshan.
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Even comparing the total value sold this year with the same period in 2019, before Covid-19 struck, there was a 30 per cent jump.
“Developers are actively laying out their business in the region, betting on the future, and thus we see land sales continuing to be hot and home prices staying expensive there,” said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institute.
Guangzhou and Dongguan were among five cities told by China’s central government last week to rein in their overheated residential property markets.
And in early January, deputy housing minister Ni Hong visited Shenzhen to inspect the local housing market, reminding officials there that “a home is for living in, not just for speculation”, a mantra attributed to the President Xi Jinping.
Shrugging off numerous rounds of cooling measures introduced since last year, home prices in the mainland’s bay area cities have all seen sharp rises, backed by strong demand.
People have been rushing into the area as the central government rolls out policies designed to help it on its path to being China’s centre of finance and innovation. The bay area, which is the size of Croatia and encompasses Hong Kong, Macau and the nine mainland cities, embodies President Xi’s ambition to create a hub to rival Silicon Valley or the Tokyo Bay Area.
The Centaline GBA Home Index, which has been tracking new and used homes in the zone since July 2017, has risen for three straight months, touching a new high of 123.03 in February.
Shenzhen ranked No 4 globally last year among major cities worldwide, with an average property price of US$783,855 (HK$6.1 million) or US$783 per square foot, according to CBRE.
Guangzhou’s home prices increased 3.47 per cent in the first three months of 2021, more than any other city in China, while Dongguan’s rose 2.86 per cent in the same period.
“Cities in the Great Bay Area are all seeing population inflows while we have seen so many other cities in the country are experiencing outflows, and homes built in such cities are selling at a rather faster pace,” said Li Maozhe, head of the Beike Research Institute’s Guangzhou Centre.
“The developers are apparently bullish on the future of the GBA.”
The huge appetite for bay area land comes despite pressure on developers to comply with a government crackdown on their heavy debt loads. Many of them have said they would cut their land purchases to save more cash.
Last Friday, China Resources Land beat 22 developers in a land auction in Foshan to win a plot for 6.45 billion yuan, or 22,000 yuan per square metre, setting a new record in the manufacturing hub, which is part of the bay area.
The amount spent on land in the zone in the first quarter accounted for nearly a 10th of the total sold in 300 cities across China, which was about 959 billion yuan in the same period.
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