Metro companies are some of the biggest owners of urban land the world over. Now Southwest China’s Nanning has brought property and commuting together in a marriage of transportation convenience.
Photo from CFP
By TANG Jun
It’s a widely accepted truism that no metro system in the world makes a profit, except perhaps those in Moscow and Hong Kong. The actual truth is that no metro anywhere makes a profit. Moscow is highly subsidized in one way or another, while the Hong Kong system is not just a metro.
Home to around half of the world’s metros, for China, this is a very serious issue.
In reality, Hong Kong MTR is a real estate developer that also runs a public transportation service. The business of taking people to work and home again makes no more profit in Hong Kong than anywhere else. And the story is no different on the mainland.
Building a metro system requires ownership or control of huge amounts of land, but after construction is complete – and this is much of the attraction of metro systems – the guts of the network are underground and the land above can be used for whatever purpose seems appropriate.
Most people with land to sell are not interested in selling or renting a 100-meter strip that snakes into town, slithers through the heart of the city and emerges on the other side before getting lost in green fields. So quite naturally and reasonably, metro companies are almost forced to buy more land than they will ever need.
The situation in the center of town is often complicated, but whatever land is controlled there is of very high value. On the outskirts, or even outside town, the land is obviously much cheaper but is generally sold in huge plots. It is impossible to buy a strip of land through a plot to lay track and purchase a quiet corner to build a modern transportation hub and all the supporting gubbins that go along with it.
Now, people in Guangxi buying residential properties in Nanning’s orbital real estate until December 31 can acquire unrestricted rides on the city subway for 10 years for themselves and two others, via facial recognition technology.
A typical journey on the Nanning Metro costs 4 yuan (roughly 50 US cents). Two trips per day for three people runs to 24 yuan per day, close to 9,000 yuan per year. All that means a 10-year total of more than 300,000 kilometers on the tracks, ringing up savings, for quite conservative Metro users, of more than US$12,000 over the period.
The prices of new homes in Nanning fell by 1 percent in the previous quarter, down by 3 percent on the year. New home prices fell in more than 80 percent of large and medium-sized cities in October.
The financial report of Nanning Metro shows that its real estate income is much higher than the metro's income. In 2021, total revenue reached 3.4 billion yuan, of which 2.3 billion yuan came from commercial property, with only 470 million yuan (14 percent) from rail transit.
Nanning Metro owns thirty residential communities and some public buildings. In 2020 it was the 10th biggest real estate seller in the city. However, as of the end of September, Nanning Metro’s assets hit 108 billion yuan with liabilities of 68 billion yuan, that’s a 63-percent asset-liability ratio.
Many metro companies are trying to integrate rail and real estate businesses to increase revenue. Metro lines can bring high value-added to land along the lines.
Nine metro companies have recorded real estate revenue of more than 20 percent of total revenue. Among them, Nanning is the highest, followed by Ningbo, Shenzhen, Wuhan, Qingdao, and Beijing.
