MAGAZINE 45 SPOTLIGHT

In the lead up to the Olympic Games, prices for courtyard homes in Beijing's cobbled backstreets are breaking records. Jack Robertson reports

‘‘Demand is high for courtyard homes in the remaining government-protected hutongs, with investors recognising the unique architectural value of these properties and viewing them almost as collectible items''

Beijing's hutongs — districts comprised of a maze of small streets — originated during the Yuan dynasty (1271-1368) when they were lined with siheyuan — groups of residences enclosed by a wall and arranged around a quadrangle courtyard. Built by the nobility, annexed by the Communist elite in the Cultural Revolution and subdivided to house many families during the population crunch of the 1970s, these courtyard homes are now among Beijing's hottest properties.

Even in the not-so-distant past, Beijing was composed of countless enclosed compounds and welled courtyards and there were tens of thousands of winding, cobbled streets around the Forbidden City alone. Now, only about 3,000 traditional courtyard homes remain in the city, as so many hutongs have been demolished (or redeveloped) to make way for the new Beijing.

Demand is high for courtyard homes in the remaining government-protected hutongs, with investors recognising the unique architectural value of these properties and viewing them almost as collectible items.

If you bought a hutong home back in 2001 for around RMB8,000 (HK$8,600) per square metre pre-renovation, or even RMB30,000 per square metre post-renovation, you are now sitting very pretty indeed. Your investment will have doubled (at the very least) and opportunities for high resale (or rental) have never been better.

Foreign investor interest in these niche properties shows no sign of abating, despite fears that the Chinese government will soon implement new rules to reduce opportunities for overseas buyers in this sector. Already the official line is that foreigners can only buy one unit within a siheyuan, but determined investors cut through the red tape by using company names to secure the remaining four units.

In 2006, the value of courtyard homes rose 10 percent to RMB40,000 per square metre on the back of the sale of a renovated courtyard for a record RMB110 million (RMB36,324 per square metre) to a Russian buyer.

A stylishly renovated courtyard home in the centre of Beijing currently sells for between RMB50,000 and RMB60,000 per square metre.

Given the limited supply, hutong homes are hard to come by (there were only about 30 transactions in 2007). But if you are lucky enough to happen upon the right hutong and the right siheyuan within it, you will be rubbing shoulders with the elite

High-profile Hong Kong owners of hutong homes include National People's Congress (SAR) deputy David Chu Yu-lin and Cheung Kong (Holdings) executive director Justin Chiu Kwok-hung.

In 1995, media mogul Rupert Murdoch paid around RMB30 million for a courtyard home in Jingshan district.

Investors who got in early and recognised the potential of siheyuan, not just as private homes but also as boutique hotels and rental opportunities, have already cashed in. Such forward-thinkers include long-time Chinophile and businessman Lawrence Brahm of the Red Capital Residence in Dongcheng and businessman and local delegate to the National People's Congress (PRC), Peter Wong Man-kong of the Lu Song Yuan Hotel in Kuanji.

Room rates are likely to increase significantly during the Olympic Games and huge rentals are already being asked for courtyard homes. Microsoft boss Bill Gates recently took out a long-term lease on a courtyard home within walking distance of the Olympic stadium, for about RMB1million a month.

Once you've hit upon your hutong home and checked your bank balance, head straight to the Beijing National Security Bureau to ensure your chosen property isn't in a security sensitive area. Confirm too that the hutong you are interested in has been awarded with a blue plaque, identifying it as historically valuable and protecting it from demolition. If not, and the area is demolished, you will receive compensation but the valuation will be based on size and tenant number only (not the cost of renovations).

You'll need to hire a lawyer experienced in purchasing courtyards to help you cut through all the red tape. He will ensure you acquire 70-year land usage rights as well as the deed of ownership. Before signing the Housing Purchase Contract, which is only legally binding in Chinese, make sure you see the following documents: the Land Use Right Certificate, a Building Work Certificate, a Project Planning Permit, a Land Use Planning Permit and a Commercial Real Estate Presale Permit.

Foreigners have been permitted to buy property in Beijing since 2003, and mortgages are easy to come by from both local banks and foreign ones with offices in Beijing. Happy hutong hunting!