(Yicai) June 11 -- Shanghai will no longer set a limit on land auction premiums, which the local government introduced three years ago, and will revert to accepting the highest bid.

The city authorities published information at the end of last week on four plots of land for auction covering an area of about 15.3 hectares and with a combined starting price of CNY8.4 billion (USD1.2 billion). The highest bidder will win, it was noted. The auction is the third this year.

Shanghai set a 10 percent ceiling on land auction premiums in 2021 as part of efforts to cool the city’s booming property market and control house prices. The policy was intended to curb speculative behavior and excessive bidding on land parcels.

The latest move will allow the market to determine land prices, helping reflect their actual value, according to Lu Wenxi, an analyst at Centaline Property Agency.

The change will make the land acquisition process more market-driven, enabling developers with bigger resources and a stronger interest in buying land to win out, said Chen Julan, a senior analyst at the China Index Academy's Shanghai office.

It will also encourage builders to carefully evaluate the commercial potential of the land before auction and better motivate them to develop high-quality projects and improve the quality for wider profit margins, Chen added.

However, Shanghai will not do away with the land auction premium limit on new home sales, according to Chen, adding that their pricing is still subject to regulatory approval.

During the second batch of four land plots sold in Shanghai late last month, the bids for two of them reached the pre-set price ceiling, with the winners decided by lottery.

With the land market cooling, 19 of China's 22 major cities have stopped setting price ceilings on land transactions, with only Beijing, Shenzhen, and Ningbo holding out, according to the China Index Academy. Premiums have been capped at 15 percent in Beijing and Shenzhen and 30 percent in Ningbo.

Editors: Tang Shihua, Martin Kadiev