Highest bid may not win site in Beijing, under new policy

Yvonne Liu
20 March 2010

The highest bidder in a Beijing land auction is no longer guaranteed to win the site, under a new policy announced by the municipality.

It is the second official move in two days to cool down the mainland’s booming property market.

The Beijing Municipal Bureau of Land and Resources said yesterday sites would now go to the bidder offering not the highest but the most reasonable price, China Central Television reported.

It also said a winning bidder must be able to afford to develop housing for lower-income groups and to provide amenities such as clinics, schools and parks.

The bureau said it would suspend the sale of sites in prime locations, where prices have been setting records. It said it would make available sites with a total area of 1,250 hectares for lower-income housing this year. That could provide a total gross floor area of 16 million square metres, 60 per cent more than last year.

In 2007, Guangzhou and Beijing said properties would not automatically go to the highest bidder, but they suspended that rule in 2008.

While it was in effect, Hong Kong-listed Beijing North Star won a residential site in Beijing’s Changying district in August 2007 for 1.15 billion yuan (HK$1.31 billion), the second-highest bid.

Alan Chiang Sheung-lai, DTZ’s head of residential property in China, said that even if the government resumed the 2007 policy, it would have a limited impact on the market.

“Guangzhou adopted the same policy three years ago,” he said yesterday. “They set up a committee to decide which developers should win the sites. They would take the company background, concept plans and offer submitted by the developers into consideration. However, the outcome of the bidding has always been criticised as unfair.”

Chiang did not expect Beijing’s move to cause land prices to fall sharply. He said developers would just reduce their offers by 10 per cent.

The government’s plan to stop selling sites in prime locations would be much more effective in cooling down the land market, he said.

On Thursday, the State-owned Assets Supervision and Administration Commission ordered state-owned enterprises to get out of the property market and focus on their core businesses.

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