High land prices spark homebuyer fears

Recent competition among property developers to buy land plots in major cities has driven some land prices to a higher-than-expected level, raising public concerns about a sudden rise in home prices, but analysts said Thursday that a fast rebound in the housing sector was unlikely in the short term.

Cities including Beijing, Guangzhou and Hangzhou have seen certain plots of land sell at levels much higher than the starting price fixed by the government in the first three weeks of May, according to a report released Tuesday by property consultancy Centaline China Real Estate.

Normally local governments list and fix the starting prices at open auctions. When the market shows signs of flourishing, land prices tend to rise to levels much higher than the starting prices, pushed up by developers desperate to stockpile plots in anticipation of an ever-booming market.

Beijing Urban Construction Group bought a plot in Beijing for a total of 1.15 billion yuan ($190 million) on May 22, 102 percent higher than the starting price. Kaisa Group Holdings bought land in Hangzhou on May 17 at a price 86.5 percent higher than the starting price offered by the government.

"Ample cash flow for developers is the major cause of the recent fever for land," Guo Guoqiang, vice president of Fusheng

Group, a Fuzhou-based real estate company, told the Global Times Thursday.

Relatively loose liquidities, more access to overseas financing, and good sales conditions in the past year have all contributed to the developers' strong capital strength this year, said Guo.

But potential homebuyers are worried about an impending hike in home prices if land prices keep getting pushed higher.

"A sudden home price rise is unlikely this year because stricter curbs will be released if home prices rise quickly," said Liu Yuan, a senior research manager at Centaline China Real Estate.

The total land area supplied in the first three weeks of May was 54 percent higher than the total supplied in April, according to Centaline.

Guo of Fusheng attributed the recent hunger for land to larger supply from local governments rather than developers' anticipation of a fast rebound of the real estate market.

The developers have to rush to stockpile plots for further development, as they don't know when or whether more prime land will be offered, Guo said.