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With the advent of open bidding pushing up land prices for Shanghai property developers, some companies will go bust or be forced to merge with competitors, industry insiders said yesterday at an investment forum.
Bai Wenhua, president of Shanghai Land (Group) Co Ltd, a government-owned agency in charge of land leasing, said that some small companies may be forced to change their business focus from real estate development to other sectors, as they can't afford to bid for land.
"As the open bidding system requires developers have a large capital base, some smaller firms have already joined forces with each other," Bai said yesterday.
The central government has required all public land put up for lease must be disposed of through open bidding as of July last year. Shanghai has used open bidding for all land since July 2001.
While officials won't say how much the bidding process has pushed up the price of land, industry sources say the cost of property in the city's Qingpu District has increased more than 30 percent under open bidding.
Liu qi, general manager of Merchant Real Estate Co Ltd, said the city has too many property developers.
"In the long run, Shanghai's up to 4,000 real estate firms will probably be integrated into 200," said Liu. "Among them, 50 might become market leaders."
Bai said the local real estate market has entered a stable rising session with reasonable profits.
"As open bidding has become a must for land leasing for commercial projects, developers have to bid farewell to their previous sudden, huge profits," Bai said. "The city government is still working on improving the bidding system, in order to make the procedure more fair and practical."
Developers are betting that the government's push to turn Shang-hai into an international metropolis will guarantee continued profits.
For the World Expo 2010, the government will relocate 200,000 families annually in the coming a few years. That will create large housing demands.
"In addition, the children of people born during China's baby boom in the 1950s have reached marriage age," said Bai. "Their housing demands can't be ignored."
Shanghai's economy has enjoyed double-digit growth for 12 consecutive years, while the per capita GDP is expected to reach US$8,000 by 2010.
"Actually, the per capita GDP will hopefully reach US$10,000 in 2010," said Chen Zhanyun, a government adviser.
(eastday.com September 19, 2003)
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