Land sales scrapped in China's Suzhou as bids exceed limits

[SUZHOU] Two land auctions were terminated in the Chinese city of Suzhou after bids surpassed limits set by the local government to stem a surge in prices.

Offers on Monday for two plots of land in the manufacturing city, which is 30 minutes by train from Shanghai, exceeded ceilings established in rules released last week by authorities, triggering the automatic cancellation of the online auction, according to a webpage compiled by Suzhou's land resources bureau.

Prices for the two plots, both in the city's west Gaoxin district, were capped at 1 billion yuan (S$210.8 million) and 2.7 billion yuan, more than double the initial asking prices, according to Bloomberg calculations based on government figures.

China's government is encouraging local curbs in top economic hubs including Shanghai and Shenzhen, where prices have surged rapidly amid stimulus measures and lower interest rates. New-home prices rose in the most Chinese cities in more than two years in April, with gains in second-tier cities surpassing advances in larger hubs, government data show.

"Developers are now flocking into popular second-tier cities, including Suzhou, for land banks, as the supply in some top hubs is diminishing," Lu Qilin, a director at Shanghai Homelink Real Estate Agency Co, said.

China's four first-tier cities sold 98 per cent less land in April from a year earlier, while supply of plots in second-tier regions rose 42 per cent, Mr Lu said.

Home prices in Suzhou, an advanced manufacturing base attracting suppliers of Apple Inc and Dell Inc, jumped 48.6 per cent last month from a year earlier to 18,128 yuan per square metre, according to China Real Estate Information Corp.

Land in the city was purchased at an average premium of 116 per cent in April, contributing 3,535 per cent more income for the city government than a month earlier, with 34.7 billion yuan in revenue from selling land, according to Shanghai Homelink.

The central government cautioned against "sky-high" land prices in a commentary on the official Xinhua News Agency on Monday, saying they are a sign of an unhealthy real estate market.

"China must curb land speculation by local governments," the commentary wrote, adding to the government's renewed vow to rein in investors' home-buying activities.

"The soaring land prices will deal a blow to the developers by raising their costs, when they are attempting to dissolve a glut in the third- and fourth-tier cities."

BLOOMBERG