Is this Chinese residential project’s asking price worth it?
Is this Chinese residential project’s asking price worth it?
Agile has high hopes for a tract of land in Guangzhou
Guangzhou’s Liwan district is considered a relatively backwards neighbourhood, far from rapid transit routes and wanting of luxury amenities. Apartments in the area command an average price of less than CNY20,000 (USD3,005) per square metre.
Land developer Agile Property Holdings Ltd, however, is selling its proposed apartment project in the area at anywhere from CNY50,000 (USD7,500) to CNY60,000 (USD9,000) per sqm, the South China Morning Post reports.
Agile’s chief financial officer Sam Cheung believes Guangzhou’s property market will eventually catch up with Beijing and Shanghai, where values for new homes surged 15 percent and 23 percent, respectively, over the past year. Guangzhou prices grew by 4 percent over the same period, in comparison.
Agile had acquired the 22-acre parcel for the apartments last week at CNY35,000 (USD5,259) per sq m, making Agile the city’s newest “land king,” a term ascribed to mainland developers making record-breaking land purchases.
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Although the parcel’s cost may justify the apartments’ price point, some analysts are still left mystified. Huang Tao, a project manager at Guangzhou-based real estate agency Centaline, tells the Post that Agile’s asking price is too high, since properties above CNY40,000 (USD6,000) per sq m is “already considered luxury in Guangzhou.”
Han Shitong, deputy director of Guangdong Real Estate Industrial Research Association, said that Agile’s proposed price range would be considered expensive even in Guangzhou’s new central business district Zhujiang New Town. “A land acquisition cost of 30,000 yuan per square metre is not cheap,” he said.
According to the Post, Agile’s core net profit ratio stood at 4.1 percent in H1 2016, way down from the industry average of 10 percent. The company’s total debt ballooned last year to CNY40 billion (USD6 billion).
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Source: Property Report