In the end, the Shenzhen government got much more than it had bargained for. Not only did it sell five residential land parcels at record prices, exceeding its minimum bids by 45%, but its latest land auction sent a loud and clear message of the government’s determination to retain talent in the city by providing low-cost housing.
More than 80 developers from the mainland and Hong Kong jostled for plots at the auction, according to the Shenzhen Land & Real Estate Exchange Center. With a combined area of 170,273 sqm (1.8 million sq ft) – slightly smaller than Victoria Park in Hong Kong – they ended up selling for a combined RMB22.38 billion (US$3.2 billion), a record single-day haul for the city government.
Logan Property Holdings paid RMB6.6 billion for the most expensive plot of land measuring 32,667 sqm, while the Guangzhou city government’s investment arm, Yuexiu Property, paid RMB5.9 billion for the second-costliest parcel.Hong Kong-listed China Overseas Land landed a winning bid of RMB5.4 billion for the third plot. A unit of Ping An Insurance Group’s venture capital arm paid RMB2.47 billion for the fourth plot while PowerChina Real Estate Group paid RMB2 billion for the smallest parcel.
More interestingly, the winners must fulfill the government’s stringent requirements, which included that 93,500 sqm, or 14% of the total auctioned, must be used for building “talent housing”, a type of affordable housing that the Shenzhen government uses as an incentive to lure high-quality talents.
Since bidding was so fierce that each plot reached the maximum price set by authorities, developers were left to compete on how much space they would set aside for affordable housing to be transferred to the government for free. In the end, the total area dedicated to talent housing was pushed up to 160,400 sqm, 72% more than the government’s initial requirement.
This was also Shenzhen’s first land sale of the year. The city is renowned for its scarcity of land. Last year, only 11 parcels of residential land were auctioned with six being sold to a local government-affiliated developer that plans to build homes only for rent. The city government did not release any residential plots for sale in 2017.