(Yicai) Aug. 14 -- Despite the overall slump in China’s property market, builders are falling over one another to buy land for development at auction in Hangzhou, capital of the economically developed province of Zhejiang. One city center plot just set the region’s highest price per square meter in years.

The plot, near a subway station in downtown Hangzhou, sold at auction yesterday for CNY36,259 (USD5,071) per sqm, a 24 percent premium and the most since 2018. Thirteen developers bid against each other. A second parcel was auctioned off the same day at a nearly 18 percent premium, and a third, at a greater distance from the city center, went for the starting price.

The high premiums and the fact that the three land parcels were acquired by private developers demonstrates the ongoing optimism about Hangzhou's land and real estate markets, according to industry insiders. Private builders have generally exited the land markets of other cities, which have been dominated by state-owned enterprises and local government financing vehicles, they added.

Hangzhou ended its 11-year land price cap policy last November by lifting the upper limit on the premium rate at land auctions, but kept the price ceiling for new homes in core urban areas.

In the first half of the year, the city earned CNY58.5 billion (USD8.2 billion) from selling the rights to develop 34 residential plots at an average premium of 8.2 percent, according to data from Wind Information.

On July 23, a consortium led by local developers Greentown China Holdings and Canhigh Group bought a residential plot in Hangzhou for CNY605 million (USD83 million) at a premium of 59 percent, the highest since 2019.

The recent increase in second-hand home transactions in the city is one reason why local developers are keen to buy land, as they believe a large portion of the funds raised from growing pre-owned home sales will flow into the market for new ones, an industry source said.

Second-hand home sales in Hangzhou surged 68 percent to 8,849 in June from year earlier to the highest in 15 months, according to official data. Last month, the figure soared 72 percent on an annual basis to 8,341, topping the 8,000 mark for the fifth straight month.

Hangzhou will hold more land auctions later this month, said Gao Yuansheng, executive vice president and executive deputy general manager at East China at the China Index Academy. Auctions for low-density residential projects in the city’s core urban areas, which are usually pricier, are expected to further drive the local property market’s recovery, Gao predicted.

Editors: Tang Shihua, Futura Costaglione