A land parcel in central Shanghai sold at a record-breaking price of 11.01 billion yuan ($1.66 billion) on Wednesday.
This means the housing price will be estimated at more than 150,000 yuan per square meter when the residential project is completed.
Rongxin (Fujian) Investment Group Co Ltd became the new "Land King" when it won a bid on the land parcel in Jing'an district, which is just two kilometers from the Bund, which borders the Huangpu River and People's Square in the city center, and three kilometers from Lujiazui, a financial hub.
Rongxin is the fifth developer to win the title of "Land King", meaning a developer which purchased a land parcel at the highest price on record in Shanghai.
The city's limited land supply for residential development and developers' growing appetite to refill their land reserves for future development, after they gained good liquidity from robust sales revenue in the first half of 2016, are the main rationale behind the land fever, said analysts.
The land auction was completed after 18 developers competed in more than 460 rounds of bidding. The final price was 1.40 times the minimum bid price.
"In the first 10 minutes, you might think they are crazy, but all you would feel is the eagerness for a piece of land in central Shanghai. This could be the last chance for a long time for many developers to include a land parcel at a premium location, due to the limited supply of land in the city center," said Wang Yuanchen who witnessed the bidding on Wednesday morning.
Lu Wenxi, an analyst with Shanghai Centaline Property Consultancy Ltd, said recent moves by regional authorities in Suzhou and Nanjing to cool the land markets in those cities have also made developers to cast their sights on Shanghai, which has already experienced authorities' adjustment and controls.
Even though recent land supply in Shanghai is rising, the supply in the central area remains limited, so bidding for a land parcel in central Shanghai is going to be fiercer in the future.
More than four parcels of land in suburban Shanghai have been auctioned in the past three months, while only two parcels of land in central Shanghai were available.
Zhang Hongwei, an analyst with Shanghai Tongce Real Estate Consultancy Ltd, said policies on financing for bidding on land parcels might get stricter in the next few months to reduce risk exposures amid the land fever, and more measures to cool down the land market are likely to be introduced after September.
