Concerns about record high land prices in China over recent months, which have raised concerns about a bubble in the land sales market and a spill over into broader property markets, are "overplayed," according to a new report by Colliers International. "The high land price has not escalated to a general phenomenon, and the achieved land prices do not significantly derail from market fundamentals," Colliers adds.
Upward price pressure in the land sales market has been "spurred by the 'de-stocking' in the property market together with improved financing of developers since the beginning of this year," Colliers notes. In contrast to the recent surge in property sales in China, up by 45 per cent year on year in the first nine months of 2009, "land purchases by developers declined by 22 per cent year on year nationwide during the same period. Developers are thus more eager to acquire land to replenish their land banks."
Colliers adds that developers’ capability to buy lands "is very much dictated by their equity and cash flow positions," and that by the end of September, major Hong Kong and China-listed developers "have raised over RMB100 bn in the stock markets through IPO, share placement or rights issues as well as RMB40 bn in the China and Hong Kong bond markets." In addition, RMB 150 bn of bank credit has been secured by developers.
Taking Shanghai as an example, this significant liquidity is pushing up land prices particularly in "core CBD areas," but "the high land price actually is a fair reflection of the scarcity value of the land resources under current market conditions," according to the report.
News & Interviews 
