Buying in Beijing
The Olympics has brought Beijing increased global recognition, so what’s the property market looking like right now? Lucy Davis finds out
Now one of the world’s emerging superpowers and with a GDP second only in size to the US, it’s difficult to recall that the Chinese economy operated under communist rule until Deng Xiaoping’s market-friendly reforms in the 1980s. As China’s wealth increases, the world’s fascination with the middle kingdom continues to grow too – so much so that it will overtake France as the world’s number one tourist destination by 2014. The number of foreign visitors to China reached 22 million in 2006 (excluding arrivals from Hong Kong, Macau and Taiwan), compared to a mere 300,000 in 1978.
The capital Beijing is proving the primary investment hotspot in the lead up to the Olympics. The city’s town planning and infrastructure has vastly improved, and more and more Chinese – and expatriates – are now moving to Beijing.
“The Lufthansa, Central Business District (CBD), Wenyu River and Wangjing, along with their surrounding areas, are the main expatriate districts,” says Margaret Ng, senior director of CB Richard Ellis Research, Greater China. “With close proximity to many embassies and leading multi-national headquarters, property in these areas appears to be a sound investment.” Besides the expat districts, she adds that Finance Street, Zhongguancun, Eastern Second Ring Road, and “areas along the subway lines” are also good investment bets.
Hong Kong’s Cheung Kong Holdings’s HK$8.8 billion luxury residential project in Shunyi, La Grande Ville, is generating plenty of excitement on the Beijing real-estate radar – although its opulent surrounds don’t come cheap. Generously proportioned between 3,229 square feet and 5,381 square feet, these flats are currently selling for RMB7,812 (HK$8,885) per square foot. The first phase is slated for completion in 2010, the fifth (and final) in 2013.
Another new housing development attracting foreign investors in Shunyi is Yosemite, where European-style homes are selling at RMB9,375 per square foot. Pleasantly situated close to the Wenyu River, Chateau Regalia, meanwhile, is fetching prices nearly as high, at RMB7,187 per square foot.
“Even the more affordable end of the market has seen price increases of 40 percent or more in the Chinese capital,” explains internationalNg. “The average presale price of mass residential housing in 2007 was RMB1,005 per square foot, a year-on-year increase of 40.5 percent. The average presale price in the first quarter of 2008 was RMB1,219 per square foot, a year-on-year increase of 44.3 percent.
“The quoted presale price of luxury apartments was RMB2,713 per square foot in the first quarter of this year, an increase of 29.1 percent. The transacted presale price of luxury apartments was RMB2,648 per square foot in the first quarter of 2008, a year-on-year increase of 24.4 percent.”
So far as rental goes, you are looking at around RMB34.5 per square foot per month for luxury apartments in the CBD. A 645-square-foot unit in Wanda Plaza can bring in RMB6,786 per month, and a 1,184-square-foot apartment in popular Central Park will likely rent for RMB11,700 per month. Apartments over 2,000 square feet, at the luxury high-end can generate rental income of RMB22,000 per month.
Ng cites Central Park as a particularly good investment option at the moment. “Having come on stream in 2001 for RMB2,750 per square foot, the quoted selling price is now around RMB10,937 per square foot; usually transacted at around RMB9,375 per square foot. The quoted rental is currently RMB39.2 per square foot per month, and the complex remains very popular for expatriates from Hong Kong and abroad.”
Foreigners have been permitted to buy property in China since 2003, and mortgages are easy to come by from local banks and foreign ones with offices in the city – but there are restrictions for investors who live outside China, for the moment at least. As Ng points out, “You must first get approval for buying a house in Beijing. The prospective homebuyer must have worked or studied in China for at least one year, and it must be the buyers’ primary residence for self-use, not for investment. After obtaining the relevant certificates, the foreigner may sign a purchase contract with the seller.”
What does Ng see as the risks of buying here? “The property price has reached a very high point after growing for about five years, and rentals are relatively low compared with the current price.” It’s hard not to agree with her when you consider the high price per square foot of exclusive new developments such as Yosemite and Chateau Regalia. However, “prices are expected to drop in the near future”, she adds.
Nevertheless, Ng is confident that Beijing real estate is a good bet for long-term investors, and you only have to look at the price increase of a property like Central Park from 2001 for evidence of that. “From a long-term perspective, we see a lot of opportunities for investors in projects with desirable locations and strong property management, and China’s rapid urbanisation and economic growth appear set to continue at least over the next ten years.”
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