(Yicai) July 10 -- Shanghai's first land auction after the city's latest relaxation of housing policy in mid-May turned out promising as premiums reached as high as 21.2 percent, indicating rebounding business confidence among property developers.

Development rights of four plots in the eastern city were transferred yesterday with a total consideration of CNY9.1 billion (USD1.3 billion), Yicai learned.

Besides lowering some of its home-buying requirements in May, Shanghai removed its upper limit on land premiums last month.

Poly Developments and Holdings Group paid the highest premium this time as the Guangzhou-based firm beat eight rivals after 60 rounds of bidding and secured a plot in downtown Yangpu district for CNY2.2 billion. The premium was 21.2 percent and the floor price was CNY88,462 (USD12,155) per square meter, the highest in the area in the past three years.

The parcel of land is not large so the total cost of the project should not be troublesome for the builder, Lu Wenxi, an analyst at Shanghai Centaline, told Yicai. In addition, the location is urban so the apartments are expected to be sold out quickly. The competition got fierce as developers were willing to pay a high price for the high-quality plot, Lu added.

Another piece of land in Yangpu attracted 79 rounds of bidding from four real estate companies, with a floor price of about CNY70,272 per sqm and a premium of 17.1 percent.

Lu said that due to favorable policies, market confidence is reviving. The increase in premiums, one of the leading market indicators, reflects real estate companies' optimism about the future, especially regarding high-profile prospects, Lu added.

However, the two other plots were sold at reserve prices. The auctions for a parcel of land in the suburban Baoshan district and another in the remote Fengxian district were attended by only one builder and sold for CNY22,252 per sqm and CNY17,000 per sqm, respectively.

Editors: Tang Shihua, Emmi Laine