ST : Bid too high, so Beijing cancels land auction

Apr 29, 2010

Bid too high, so Beijing cancels land auction

BEIJING: A land auction in Beijing was cancelled after bidding exceeded a price ceiling set for the lot, as the Chinese government expands efforts to rein in the nation's property market.

The highest price bid for the Beijing lot, zoned for residential development, at the auction on Monday was 4,718 yuan (S$950) per sq m, exceeding the 4,700 yuan per sq m limit set by the government, the Ministry of Land and Resources said on its website yesterday.

The ministry's Beijing branch said it began setting limits on the price of land this month on a trial basis.

'Imagine a seller refuses your business because he thinks you are paying too much for his products,' Bank of America-Merrill Lynch analysts wrote in a report distributed yesterday.

'It demonstrates the type of pressure the central government is putting on local officials to get the property market right this time; this increases the risk of potential overshooting in the property market crackdown.'

China began requiring developers to pay higher deposits for land purchases last month, and banned banks from lending to developers found to be hoarding land, as Premier Wen Jiabao pledged to crack down on real estate speculation and keep housing affordable.

Property prices in 70 Chinese cities gained a record 11.7 per cent last month compared with prices a year earlier.

The average price of land in 105 Chinese cities rose 8.1 per cent in the first quarter from the price a year earlier, to 2,700 yuan per sq m.

The ministry's Beijing branch this month began limiting how much land developers may buy.

Videos will also be taken of land auctions, notary personnel will observe the bidding, and contracts between Beijing's land bureau and developers for purchases of lots will be made public, according to the statement.

China's property stocks have plunged 20 per cent this year, making them the worst performers among

major industry groups after Beijing began clamping down on the property market.

China will place a moratorium on capital raising by real estate firms as part of a broader campaign to rein in property price rises, state media reported yesterday.

The move could stand in the way of about 110 billion yuan in share issues planned by 45 companies, unnamed sources close to the China Securities Regulatory Commission told the China Daily.

The suspension will allow the Ministry of Land and Resources to examine whether companies have used illegal methods to manipulate market prices, the newspaper said.

BLOOMBERG, REUTERS