(Yicai Global) July 29 -- Shanghai has raised CNY78 billion (USD11.5 billion) in its second auction of land use rights this year, which ended yesterday, with better results than the first auction held last month due to the more attractive locations on offer and lower starting prices.

Thirty-four plots for residential housing were successfully auctioned off at an average premium of 4.49 percent, Yicai Global learnt from the city’s land-trading documents.

Poly Real Estate Group, China Merchants Shekou Industrial Zone Holdings and Huafa Properties were the biggest spenders. Poly Real Estate purchased CNY17.8 billion (USD2.6 billion) worth of land use rights, China Merchants Shekou CNY16.5 billion and Huafa Properties CNY11.5 billion.

Poly Real Estate, which failed to secure any plots in the first round despite taking part in the bidding for seven of them, purchased five land parcels this time, including the most expensive one at CNY4.7 billion (USD709 million), which the Guangzhou-based firm bought together with Yuexiu Property.

Shenzhen-based China Merchants Shekou spent about CNY20.5 billion (USD3 billion) in the first two rounds, already more than the whole of last year, according to research institute Keyland.

In this land auction round, the combined asking price of the downtown plots accounted for 27.4 percent of all starting prices, according to data from real estate consultancy company EH Consulting. In the first round, the ratio was just 7.2 percent.

The second round had many plots in sought-after downtown areas, including one located between Xijiao Park and Xijiao State Guest Hotel, which helped attract more bidders.

Some suburban plots were also in popular locations. “Despite being in the suburbs, property sales in these areas are hot and the apartments can sell out as soon as they come on the market, so all developers need to do is focus on quality,” Yu Xiaoyu, research director of EH Consulting, told Yicai Global.

Although state-owned companies and central enterprises were still the main participants, the lower starting prices attracted many small and medium-sized developers to take part.

“We’ve seen quite a few newcomers in both rounds of land auctions this year, as smaller players who previously could not take on the big guys seize the chance to tap into the Shanghai market,” said Lu Wenxi, a senior market analyst at Centaline Property’s Shanghai branch.

“Some plots’ starting prices were under CNY1 billion (USD148.5 million) and others were between CNY2 billion and CNY3 billion,” Lu said. This allows companies with different financial strengths to find an entry point.

Shanghai’s land transaction turnover is expected to exceed this year’s target and outperform that of last year, now that demand for residential property in the city is bouncing back, Yu said.

Editors: Tang Shihua, Kim Taylor