'King of all land sales' gets sour reaction from official press

Raymond Li

One can only wonder what Premier Wen Jiabao thought of the news that a premium site for housing in Beijing sold for a record price last week - just three days after he reaffirmed his commitment to policies aimed at cooling the property market.

Reactions by state media to the 'king of all land sales', however, suggest some unease in the central government about whether its programme may be faltering amid a slowing economy that relies heavily on property investments.

The residential parcel in the capital's Haidian district was sold to a private developer for 2.63 billion yuan (HK$3.23 billion) - or 33,831 yuan per square metre - in a hotly contested auction last Tuesday. This beat the previous record for residential land sales of 29,859 yuan per square metre, set in 2009.

If you subtract the 16,400 square metres that must be set aside for subsidised housing, the lot sold for around 41,500 yuan per square metre, making it the most expensive residential site on the mainland.

It was a similar record-breaking land sales two years ago - and a corresponding jump in home prices - that spurred the central government to enact policies to cool down the property market.

However, the People's Daily tried to play down the significance of the Beijing sale by urging the public not to read too much into it.

'What we should be most concerned about is media organisations knowingly or unwittingly helping to whip up publicity for the so-called king of all land sales,' the newspaper said, urging the media to exercise caution when reporting such potentially incendiary figures.

'Such reports subsequently help push up housing prices by distorting market expectations, and disrupt the broader curbs on the housing market,' it said.

Land sales remain a major source of revenue for local governments. Many are feeling the pinch from the property-market curbs and have been pressing Beijing for concessions.

Nonetheless, the average price for new residential homes in the 100 largest mainland cities edged up 0.05 per cent last month, ending nine months of declines, the Oriental Morning Post reported last Monday.

Similarly, the National Business Daily reported last Tuesday that the housing market in Hangzhou , Zhejiang province - an area known for its expensive homes - appeared to have come out of its slump.

Home prices in some luxury estates rose up to 10 per cent in the first six months of the year.

That same day, the Southern Metropolis Daily reported that home prices had risen as much as 6,000 yuan per square metre at an estate next to a building lot in Zhujiang New District, Guangzhou that sold for 32,967 yuan per square metre in May.

It is worth noting that the Beijing auction had been delayed for nearly a week. In an unusual move, city land authorities also capped the overall sale price and instead asked the last round of applicants to bid on how much floor area they would commit to affordable housing, as a pre-condition.

In the end, private developer Sinobo made the successful bid.

On auction day, the People's Daily warned major state-owned developers to refrain from bidding because it said their status as government-controlled developers could give the public the impression official policy had changed.

'As to a developer affiliated with the central government, it should facilitate the central government's curbs on the property market by developing more affordable houses and commercial houses for ordinary people, instead of only casting their eyes on their balance sheet,' it said.

In a subsequent 'special report' on corporate social responsibility, the paper praised the housing-development arm of China Poly, once run by the PLA, for its decision to withdraw from the auction.

Meanwhile, the Xinhua Daily Telegraph took a swipe at all developers for wanting to be involved in such record-breaking land auctions. It warned that soaring land prices could lead to panic buying, which in turn would push prices up irrationally.

'On the other hand, it could also trigger even tougher curbs and interventions from the central government,' it said. 'Some developers would implode because of the price they had to pay for the 'king of all land sales'.'