WHEN THE hammer came down at the auction earlier this month, the Wanliu residential land plot in Beijing’s Haidian district went for 2.63 billion yuan (€340 million), a new record for a plot of land in the capital.
The auction was attended by big-name real estate companies like Vanke and Poly, and the 38,869sq m plot was bought by Beijing Hehuahengrui Real Estate Company, which pledged to build new homes for previous residents of the area.
Wait a minute. Isn’t this supposed to be a time of austerity in the Chinese real estate business?
The sale broke a record set in 2009, when the property sector was in a risky bubble that only started to deflate late last year.
Europe’s debt crisis and a sluggish US economy are the reasons generally given for fears about China’s economic prospects, but the fate of the property market is key to knowing whether China has a hard or a soft landing in store.
The market has certainly shown signs of a recovery, even as premier Wen Jiabao has promised to keep in place measures aimed at curbing growth, such as increased down payments, property taxes and limits on the number of properties that someone can buy.
Average home prices in 45 Chinese cities in June were flat, breaking an eight-month decline, and they rose in 25 other cities. Home sales have also picked up, according to the statistics bureau.
Last week came an urgent government notice, couched in strong official language, telling local authorities to keep a firm grip on the housing market to prevent property prices from rebounding.
“Local authorities must strictly implement the property-control policies. Don’t relax the control without authorisation. Those that have loosened controls must rectify the policies right away,” the statement said, as cited by Xinhua news agency.
Wen has sought to ease fears among the populace that prices are going to start rising again, and promised to “unswervingly” continue property controls.
At the same time, the People’s Bank of China, concerned about slowing economic growth, cut its benchmark interest rates on July 5th for the second time in a month.
In a clear reference to the sale in Haidian, the notice said that local governments should set “reasonable” starting prices for land auctions and adjust their sale plans in advance if the sites are “highly likely” to generate record prices.
“Fluctuations have appeared recently in the property market and land market. Although they have not changed the overall picture, the complexities and instabilities have increased in the market,” said the notice.
It remains to be seen if this “unswerving” choice will curb early signs of a revived market.
