How China’s most contested land auction drove developers into a frenzy

Luck mattered more than money for hundreds of property developers who bid on eight plots of land put up for auction by a local government, in a frenzied scene in China’s real estate market.

At least 400 developers from across the country jammed into a grand theatre in Jiaxing, a small Chinese city nestled between Shanghai and Hangzhou, on Monday for the land auction. It took just five minutes for the first plot of land to hit a ceiling price imposed by the government, requiring the use of a lottery-style process to determine the winner. The developer who finally emerged as the winner was as extraordinarily excited as “an actor winning the Oscar”, the local Qianjiang Evening News reported.

The 88 developers who agreed to pay ceiling price for the first plot of land had also agreed to make full payments within 30 days. Five out of the eight plots hit the ceiling mark, requiring the lottery system to be invoked to decide the winner.

“Developers are enthusiastic about buying land” in small cities, as land in places like Beijing and Shanghai becomes scarce and expensive, said Yan Yuejin, a researcher with E-House China R&D Institute, a consultancy that tracks land deals across China.

“There is room for land prices to increase in places such as Jiaxing ... It means property prices will continue to rise,” said Yan. One reason for Jiaxing’s bright prospects is that the city is integrating with neighbouring Shanghai.