Massive AppealSprawling palatial homes, the kind of thing you see in 1980s nuggets that trade in decadence like Dynasty, are gaining popularity in China right alongside the rise in numbers of wealthy industrialists. First tier cities in China have strong luxury residential markets that are showing few signs of slowing down. But once again, the government on the Mainland has imposed restrictions designed to reduce property speculation, particularly in the residential sector. So much so that it’s starting to affect development and investment.

According to research unveiled in mid- September by Knight Frank and Holdways, “Real estate developers continued to adjust their investment strategies by focusing more on the commercial real estate market, in order to lower their exposure to government policy restrictions and maintain stable cash flow. For example, seven commercial sites with a total area of [1.5 million square feet] were sold in Shanghai in the first half of 2012 for a total transaction amount of RMB1.8 billion.”

That may be true, but according to Colliers International, locations such as Beijing and Shanghai don’t have much to fear. “Looking ahead, Colliers expects more new [residential] projects to be launched for lease in the second half of [2012] … For high-end residential sales, both sales volume and prices are expected to increase steadily due to moderate new supply and an optimistic mid to long-term market outlook from investors.”

The Shanghai-based Feizhou Group has just waded into this environment, quite confidently. Located in Huzhou, about 150 kilometres from Shanghai, Le Cove is a 73-property development on the shores of Lake Tai set for completion in mid-2013, designed as a luxury lifestyle property surrounded by natural beauty and indulgent of purchasers’ demands and desires. Le Cove will be a stone’s throw from the Huzhou Taihu Resort area, currently under development, which will incorporate the already completed Sheraton Hotel & Spa. This is all very familiar to investors, but the project itself is something of a novelty in China.

“This is actually quite unique. I’ve been doing this for 18 years and this is one of the few projects like this,” begins Feizhou director David Wong. The predictions by the likes of Colliers and Knight Frank wouldn’t appear to have much impact on Wong’s plans. Le Cove comprises 14 individual lakeside villas, one garden villa, 12 townhouses and 46 semi-detached homes, ranging in size between a whopping 5,500 and a massive 11,800 square feet. Why so big? “We were fairly certain what we wanted to do. Home entertaining is a trend so the brief was drawn to make sure we could cater to that,” explains Wong. “The lakeside villas, if you went into any one of them and you’d walk into a dining room that could easily hold 20. There’s a kitchen and a backup kitchen for catering … Our smallest home is 5,000 square feet. It takes at least that much space to comfortably entertain 12 or 15 people. All the bedrooms have ensuite bathrooms. We were very specific on those details.” All the homes regardless of configuration, feature some degree of outdoor space — a garden, a terrace, a patio — as well as covered garages and maid’s quarters, and many are designed to facilitate private screening rooms, gyms and children’s play rooms.

So who’s buying these behemoth homes? Perhaps investors, as, “Continued inflation and the appreciation of the renminbi have made the high-end residential sales market a highly attractive investment channel in recent years. Despite the recent regulations, robust demand underpinned a boost in sales volume of high-end residential properties during the second quarter as compared with the last quarter,” stated Colliers research. Nonetheless, Feizhou and its sales agency, Landscope Christie’s International Real Estate is well aware of potential buyers in Hong Kong, just not for traditional investment purposes. Landscope Christie’s chief executive KS Koh thinks many of Le Cove’s buyers will be end-users not primarily interested in rental returns, which are unlikely to be impressive given the location. “There are two target buyers. The first is the people who are investing in Shanghai and the surrounding areas. These people usually have higher requirements when it comes to entertaining clients and local officials and so on. You can entertain here with golf, yachting, and there’s a Sheraton next door, so you can entertain either in your home or at the hotel,” theorises Koh. “The second group are somehow related to Shanghai. There is a huge proportion of people that are ethnic Shanghainese in Hong Kong and they maintain a presence — relatives and friends — in the area. Those people will buy for themselves or for family.” And at RMB30,000 to 50,000 per square metre, HK$3,300 to 5,500 per square foot, Hongkongers are likely to see good value in Le Cove.

Wong and Co. are working on implementing an owners’ benefits programme with the Sheraton and Feizhou is making final decorating services available to buyers that opt not to do their own interiors, but as a lifestyle investment, Lake Tai itself remains the biggest attraction. On top of that, recent changes in construction regulations make Le Cove the last development able to position itself directly on the lake; any new projects will be compelled to be set back from the water’s edge. The Carringtons wouldn’t like that.