(Yicai) May 21 -- Foreclosed homes in a number of Chinese cities have been selling for much more than their asking prices recently. Even though such sales account for only a tiny proportion of the country’s secondhand housing market, the uptick in prices is boosting investor confidence in the real estate market’s recovery, industry insiders told Yicai.

A foreclosed property in Shenzhen’s Luohu district with a floor area of 3,000 square meters, for instance, finally sold for almost five times the asking price at CNY114 million (USD15.8 million) on May 14 after 450 rounds of bidding by 34 bidders. And three other properties in the hi-tech hub sold for similarly high premiums at court-ordered auctions in April, with one fetching more than 260 percent of the starting price.

Even pre-owned properties in smaller second- and third-tier cities are selling at high premiums after fierce bidding. For example, a standalone villa in Jiangmen, southern Guangdong province changed hands for CNY840,000 (USD116,300) earlier this month, about 50 percent more than the asking price.

Most of the foreclosed homes that are selling at a high premium are in great locations with good surrounding infrastructure, Zhang Xiaofei, senior analyst at the China Index Academy, told Yicai. These types of properties are hard to come by in the regular secondhand market, so auctions have become an alternative way for buyers to snap them up. With buyers and sellers bargaining hard on price, the final sales price can soar.

Around 78 percent of the foreclosed properties that went under the hammer in March sold for more than their asking price, even though the number of foreclosure auctions was down 20 percent from the previous month, according to data from real estate analytics firm CRIC China. This is a sign that buyers are confident of the value of certain hard-to-find properties.

While foreclosed properties on auction in major cities only make up about 0.6 percent of secondhand home sales, the prices they fetch can have a big impact on how buyers view the broader housing market, said Song Hongwei, co-director of To-spur. Therefore, if these auctions continue to heat up, market sentiment among homebuyers should also improve.

An upcoming auction of two historic garden-style houses in Shanghai’s Changning district on May 26 is garnering a lot of attention. Built in 1925, they are standalone Western style villas with gardens located in the city’s former consulate and expatriate area. Only about 50 houses of this type remain in good condition. Such homes tend to be privately owned and are rarely sold publicly.

The starting bid for these two properties is CNY250 million (USD34.6 million). They had previously been listed for CNY350 million in the secondhand market but did not sell. Even with a price cut of 28.6 percent, they are still among the priciest homes of their kind.

Editors: Tang Shihua, Kim Taylor