Can the ‘world’s factory’, Dongguan, tame its runaway land prices by changing auction rules?
- Land prices in the manufacturing hub have soared as builders have used increasingly aggressive bidding tactics to get a foothold in the Greater Bay Area
- Under a new auction mechanism, Dongguan’s land will be awarded to the developer whose offer is closest to the average of the bids submitted
Authorities in Dongguan, a major manufacturing hub near Shenzhen, have changed the way land auctions are carried out in a bid to cool the sizzling market.
It comes after a flurry of aggressive bidding wars involving developers desperate to get a foothold in the Greater Bay Area drove Dongguan’s land prices to unprecedented levels in the first five months of the year.
Under the new mechanism, instead of awarding the land to the highest bidder, it will go to the developer whose offer is closest to the average of the tenders submitted.
“The new rule means developers have to guess competitors’ bidding prices and offer a price closest to the average level, which will make the market more rational,” said Yan Yuejin, research director of E-house China R&D Institute. “Home prices growth should soften amid expectation of tighter curbs.”
Between January 1 and May 31, Dongguan’s average land premium – the amount paid over the opening price – soared to 51 per cent from 13 per cent in the second half of 2018, the highest among the nine mainland Chinese cities in the bay area scheme, according to property consultancy CRIC. The city’s land sales by volume have shot up by 875 per cent, the fastest within the planned economic hub.
