Surging land price faces growing risks

Land prices in some of China's cities have seen obvious bubbles though home prices remain reasonable, Sunac Chairman Sun Hongbin said on Monday.

The floor price of some of China's second-tier cities, such as Nanjing and Suzhou in Jiangsu province, have recently surged to 30,000 yuan ($4,615) to 40,000 yuan per square meter, which Sun believed is unreasonable since the average home price in these two cities has been around 20,000 to 30,000 yuan per sq m for years.

"Developers who grabbed high-priced land parcels in these cities will have really difficult time when the market encounters a headwind," said Sun, though he believed the existing home prices are at a reasonable level. "Such a surge is definitely unsustainable."

Similar situation also occurred in first-tier cities like Beijing and Shanghai.

On May 5, the floor price of two land parcels in Beijing's Daxing and Changping district, both of which are outside the capital's sixth ring road, exceeded 33,000 yuan per sq m, indicating the sales price will probably reach 70,000 yuan per sq m.

But Sun believed there is still room for top luxury projects in the capital. "I will not be surprised if there are projects with a unit sales price exceeding 400,000 or even 500,000 yuan per sq m in Beijing," said Sun.

The highest unit price of Sunac's project "One Sino Park" will exceed 300,000 yuan per sq m, according to Sun. That will make the project the most expensive one in Beijing or even in the country. The company bought the land parcel of this project in 2013, with the floor price of 730,000 yuan per sq m, making it the "land king" in the country at that time.

Statistics from real estate brokerage company Centaline China showed that more than 60 projects with unit price higher than 100,000 yuan per sq m will enter the Beijing market this year.