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Saturday February 13, 2010

Boom times in newest ‘Disney Land’

Landowners off the Disney theme park site have been laughing their way to the bank with property developers outdoing each other in frenzied bidding for choice sites.

PROPERTY around the much-anticipated Disney theme park here, which will be the third in Asia after Tokyo and Hong Kong, has seen a flurry of transactions at markedly improved prices since approval was given to the theme park project in October last year.

On Nov 4, one-and-a-half hours after the project was announced by the Shanghai municipal government, a so-called “Disney Land” plot covering 56,570 sq m near the site was acquired at a record high price of 1.19 billion yuan (RM598mil) by Shanghai Xiangyu Group.

Noteworthy was that the price before the announcement was only about 600 million yuan (RM302mil). Based on conservative calculations, the apartments to be built on the plot will cost around 19,000 yuan (RM9,045) per sq m.

In the afternoon of the same day, Shanghai Pudong New Area Real Estate Co Ltd secured a piece of commercial land after 39 gruelling rounds of close calls with a bid of 49.5 million yuan (RM24.9mil).

On Wednesday, China’s largest residential developer, Vanke Co Ltd, bid 20% higher than the nearest competitor to wrest a piece of land about 5km from the theme park. With an acquisition price of 893 million yuan (RM448.8mil), house prices there should start at 6,000 yuan (RM3,015) per sq m.

Among the 13 bidders for the coveted land were Singapore’s Keppel Land Ltd, Li Ka-Shing’s Cheung Kong (Holdings) Ltd, Poly Group and Citic Real Estate.

“Following the merger of the Nanhui and Pudong New Area districts by the city government last year, almost all the residential and commercial projects around the site of the Disney theme park had been selling like hot cakes,” the proprietor of a Shanghai-based real estate marketing firm said in his blog.

“And with excitement over the Disney theme park building up, the real estate market in the area has become even livelier. The area is now the target of many investors.”

The world famous theme park is to be built at the suburb of Chuansha in Pudong New Area, about 10 minutes’ drive from the Pudong International Airport east of the city.

The first phase of the project comprising the theme park and other complementary facilities – with a total investment of 25 billion yuan (RM12.6bil) shared by Walt Disney Co and several state-linked Chinese companies – will cover 4 sq km, and is expected to be ready by 2014.

Road works around the theme park will begin this year. Several major roads like the Middle Ring Road, Shenjiang Road and Nanliu Highway will be upgraded to cater for the expected increase in traffic.

The road projects are part of the city’s major construction plans this year, with a total budget of 160 billion yuan (RM80.4bil).

Since commencement early last month of the initial relocation exercise, 75% of the 2,000 households and 40% of the affected companies have already accepted the compensation deals.

“We should be able to finish the first phase of relocating the residents and companies in June,” Yu Yong, head of Chuansha town, told the annual municipal legislature session last month.

Shanghai Mayor Han Zheng told representatives of the Shanghai Chinese People’s Congress, the city’s top legislative body, that he did not want to see housing prices around the Disney theme park soar to unreasonable heights.

“We must not allow that to happen,” the mayor reminded the head of Chuansha town. “We are aware of the concerns of the representatives on a bubble in the real estate market. I must stress that we don’t expect housing prices around the Disney theme park to be overly high.”

He said he would negotiate with the Pudong government about allocating some land around the site for budget homes.

Despite the mayor’s reassurance, past Disney theme park projects have proven otherwise. All signals point to an increase in housing prices in Shanghai’s Disney town.

The Hejing Jiayuan apartments near the site are now selling at 13,000 yuan per sq m compared with 10,000 yuan at the beginning of last year, while the apartments at Dingxin Mingliu Yuan, the largest housing project to date in Chuansha, are going for 16,000 yuan per sq m, up from 12,800 yuan.

Observers said that in view of the rising trend in house and land transaction prices, coupled by the spillover effects from the upcoming Shanghai World Expo 2010, property prices might go up to 30,000 yuan per sq m.

According to the National De­­velopment and Reform Com­mission, property prices in the country last month were the highest in 21 months and the land-supply shortage is unlikely to ease for some months.

House prices in 70 major cities on the China mainland jumped 9.5%, the biggest year-on-year increase since May 2008. The upward trend was the eighth in a row since last June when property prices began to record growth following months of decline.

Sanya and Haikou in southern Hainan province registered the biggest price growth for new homes, surging 31% and 35%, respectively, from last year following the Chinese government’s announced intention to turn the province into an international tourism destination.

In Shanghai, prices soared 8.8% from a year ago and was up 0.7% from December.

“The country’s property market did not bottom out until last March and real estate developers continue to keep their prices high at the moment despite a contraction of volume and this helps explain the notable growth,” Chen Sheng, deputy dean of the China Index Academy, a major real estate re­­search organisation, told Shanghai Daily.

“Most developers have not seen any reason for a price reduction because new home supply remains largely inadequate around the country while demand is still high.”

Chen said usually supply could be regarded as adequate if the stock of homes was able to withstand six months of sales.

However, in many cities such as Shanghai and Hangzhou, present stocks would last for about two months only, he noted.

Analysts said that the nationwide supply shortage resulted from slow property construction during the deep industry correction in late 2008, and robust buyers’ sentiments since the market rebound would not be relieved until the third quarter of the year.

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