Representatives of real estate developers watch a land auction through closed circuit TV in Beijingon Monday. In 2014, the Beijing government raked in 191.7 billion yuan from land sales, up 5 percent yearonyear. WANG GUIBIN / FOR CHINA DAILY

Price tags shattered as developers snap up five suburban sites

Beijing's land market started the year with five plots sold at record prices within three days, underscoring how the capital remains red hot as developers shun smaller cities.

A consortium including China Resources Land Ltd and Ping AnReal Estate Co won a large residential site in the southwestern Fengtai district on Wednesday for 8.625 billion yuan ($1.39 billion), making it the most expensive plot in the capital's history.

The price tag, 22 percent higher than the government's opening price, represents 20,600 yuan per square meter. Excluding some apartments that will be subject to price caps, the winning bid works out to more than 50,000 yuan per sq m.

Mao Daqing, chief executive of the Beijing division of the nation's second-largest developer, China VankeCo, told reporters after the auction that the city's housing price will enter the "above 60,000 yuan (per sq m) era" in 2015. The company participated in the auction but did not win the bids.

Wednesday's deal broke the record held by a commercial-residential site in downtown Beijing's Huajia Hutong, which was sold to Beijing Huarong Infrastructure Investment Co Ltd for 7.46 billion yuan in August.

Just two days earlier, a consortium including The Wharf (Holdings) Ltd and China Merchants Group paid 8.6 billion yuan for two adjoining sites in Fengtai. The winning bid was 50 percent above the floor price.

In just three days, Beijing's district governments, all in suburban areas, sold five plots worth 17.93 billion yuan.

In 2014, despite an unprecedented property market downturn, the Beijing government raked in 191.7 billion yuan from land sales, up 5 percent year-on-year. It was the largest amount for any local government in the country, according to consultancy China Index Academy, a division of SouFun Holdings Ltd.

On a per capita basis, the amount would work out to 9,129 yuan for each resident of Beijing.

"All top 50 Chinese developers want a share in the Beijing market, which makes competition here really intense," said Yan Yuejin, an analyst with E-house China R&D Institute. "Driven by this, it is logical that Beijing's property market will enter the 'above 60,000 yuan era'."

"As the campaign to integrate Beijing with neighboring regions deepens, land prices in the capital's suburban areas will go up. So will home prices there," he said.

Beijing, Tianjin and Hebei province are seeking to unify their economies into a "capital economic circle".

The latest bids also reflected a couple of market trends, analysts said.

For one thing, soaring prices prompted developers to bid in partnerships. That happened on both Wednesday and Monday. It took more than 50 and 20 rounds, respectively, for the winner to emerge.

For another, developers also have to accept stringent conditions by the government to win the bid. In each case, developers promised to allocate a considerable proportion of the land for price-capped homes, which significantly cuts their profits.

While Beijing's land sales climbed to a fresh high, most second- and third-tier cities saw their land sales revenue plunge by more than one-third last year.

According to the China Index Academy, first-tier cities in 2014 sold 506.8 billion yuan of land, down 3 percent. But that corresponded with smaller areas sold, and the average land price actually surged 41 percent.

In third-tier cities, however, land sales dropped 37 percent and the average land price fell 2 percent.