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Kunming land sale revenues soar, property market still shaky

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Kunming's property market has attracted notice before, but recent news of the massive amount of revenue the municipal government has taken from land sales so far this year is raising eyebrows nationwide.

Revenue from public land sales in Kunming in the first eight months of 2011 totaled 59.5 billion yuan (US$9.3 billion), an increase of 190.5 percent over the same period in 2010.

To put things in perspective, Shanghai and Beijing - both of which have roughly quadruple Kunming's population - are the only Chinese cities that have made more money from public land sales this year. Rather than being an indicator of the Kunming market's growing maturity, the recent land revenue windfall is all but certain to be a temporary spike fueled by a sudden surge in new supply of prime real estate.

Most of the land sold by the city this year became available after having been cleared as part of the "urban village transformation" (城中村改造) program that will likely be one of the best-remembered aspects of the current administration of Kunming Party Secretary Qiu He (仇和) and Kunming Mayor Zhang Zulin (张祖林).

"Urban village" is the term given to the shoddily built and densely populated sections of the city that are being demolished en masse to make room for large property developments, which recently have tended to be mixed-use commercial/residential projects.

Part and parcel with the large-scale demolition has been the forced relocation of former residents of urban villages, a process which has been far from smooth, as the mayor tacitly admitted last year.

In addition to the large swathes of former urban villages that have hit the market in recent months, lands in Kunming's central business district that were formerly home to government buildings, most notably the Kunming municipal government itself, have also gone up for sale.

Despite the large amount of revenue the land sales have generated, there is little reason to believe that the general cooldown that the Kunming property market has experienced in the last year will reverse course soon.

In what may be a harbinger of upcoming corrections in the Kunming real estate market, sales of properties that have come online recently, including high-profile projects off of Huanhu Dong Lu on three peninsulas on the east side of Dianchi Lake, have sold at less than the expected market value - or failed to sell at all.

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The correction has only started here in KM...wait till the sh*t hits the fan in EU and good ol US of A.

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