Market sentiment of the residential market in Beijing has improved in Q4, following the new interest rate cut and newly relaxed mortgage terms. The one-year benchmark loan interest rate was adjusted to 5.6%, down 0.4 percentage points. For mortgage terms, second home buyers without outstanding mortgage loans can now enjoy the same mortgage loan rate as first home buyers, of which the highest is at 70%.
The total transaction amount rose by 48% q-o-q to RMB 67,878 million and transaction volume rose to 2.74 million sq m, up 63% q-o-q. Average home price remains stable at RMB 18,654 per square metre, which rose slightly 0.43% q-o-q. Looking forward, the residential market in Beijing should be rejuvenated in 2015 under the incentives provided by the central government, especially when economists anticipate China’s central bank to cut rates further.
For office market, the average price remains stable at RMB 25,590 per square metre, up 2.1% q-o-q, whereas rent rose slightly at 1.3% q-o-q to RMB 378 per square metre per month. The office market remains calm without large absorption due to shortage of office space, and leasing activities mainly lie on renewal contracts. Vacancy rate is around 4.4%, which has dropped 0.8 percentage points.
In 2015, there will be a surge of new office projects to be completed, including Raycom Tower B in Zhongguancun, Dreamsfount 35 etc. Demand for office market will continue its decentralisation process, as non-core districts like Shunyi and Huairou are attracting more attention given favourable government policies and their relative lower purchasing ad rental costs.
In terms of retail market, the average price of retail property rose by 1.13% q-o-q to RMB 24,197 per square metre. Vacancy rate remains low at 2.2%, reflecting a stable strong demand for prime retail space. On the other hand, online sales is becoming a new trend of consumption activities, whereas shopping malls in Beijing have started to cooperate with online retailers to developer online-to-offline business, acting as the offline store for these online retail shops from Taobao or other platforms.
Moving forward, the anti-corruption policies in China will affect demand for luxury retail sector. Shopping malls may target tenants of popular brands instead of luxury retailers. Rental growth will slow down, adding the surge in new supply of retail space in 2015. For instance, WF Central in Wangfujing will provide 50,000 square metre of high-end retail space.