Property

Keen Competition For Beijing Luxury Property Market

Keen Competition For Beijing Luxury Property MarketAs the land price of Beijing continues to rise, developers have to develop more luxury residential projects to cover the increasing cost. There has been a surplus of luxury housing in Beijing. For the second half of 2014, 50% of the overall new projects were middle to high-end housing, not to mention the luxury projects that have been laid aside due to the price limit set in Beijing since 2013. The inventory of luxury projects remains high at the moment.

In 2013, the government issued a price limit in order to hamper speculation, banning presale of any project with price per square meter higher than RMB 40,000. The luxury property market suffered from such regulations. Nonetheless, there were signs of loosened restriction, as quite a number of approved pre-sale projects in 2014 have an average price surpassing RMB 100,000 per square metre. For instance, LA VIE developed by Sino-Ocean Land gained pre-sale permission with the average price higher than RMB 120,000, hitting an all-time high.

As the restriction relaxed, the luxury property market in Beijing saw its recovery in 2015. Amid the economic downturn, demand for high-end residence is less affected than rigid demand from end-users. The simulative mortgage policies issued in March also helps users with sufficient funds to purchase a second house with better quality. For the first four months of 2015, there were already 420 transactions of luxury housing, with the average price higher than RMB 60,000 per square metre, which rose by 83.4% y-o-y. The total transaction volume reached 123,000 square metres, which is up 194% y-o-y. The average price also increased by 30.5% y-o-y to RMB 92,938 per square metre. 104 cases were super-luxury residences sold at RMB 50 million or higher, of which their total transaction amount trended up to RMB 7.32 billion, hence displaying the strong momentum of the luxury property market in Beijing.

Despite the rising purchasing power for luxury properties in China, the wealth only concentrates on a small amount of high-end customers. While there are more than 1,000 super-luxury residences in Beijing waiting to be launched in 2015, developers facing such high inventory have to compete for limited target customers. Another concern is that many “luxury” projects in Beijing do not have corresponding high-end facilities, as their high price is only ascribed to the rising land and construction cost. Such mismatch between the price and the actual quality of housing leads to excessive supply of “luxury” residences in Beijing, which in turn weakens the actual investment value of the overall luxury market. Developers need to come up with new tactics to raise the attractiveness and quality of their luxury projects. Some developers plan to increase the proportion of greening zone in order to attract the young millionaires looking for a healthy lifestyle.