Supply and demand within Beijing's luxury property market

Beijing luxury property market

Since March 2017, various government housing purchase controls have repeatedly affected Beijing’s property market, and it took more than six months for the market to adapt to the new environment. As a result of the policy restrictions, Beijing’s residential transactions plunged close to 40% year-on-year to about 6.1 million square metres, with an annual price growth of 20% at RMB 34,117 per square metre. However, there is a favourable market sentiment by end users, with a stable property policy outlook in the near term. The overall residential market transaction volume will continue to stay low this year as housing prices remain high.

Despite the market's weak performance, the luxury property market appeared to have shrugged off most of the negative impact that stem from the restrictions. Between an ease in the government’s grant of presale permits and supply and demand imbalance, this niche market saw an uptrend in both transaction volume and price towards the end of last year. According to market sources, the total transacted floor area rebounded by more than 30% m-o-m last November for properties valued at RMB 80,000 per square metre and more; the average transaction price also experienced a mild growth per month.

Three years ago, Beijing’s housing supply was targeted by the demand of home upgraders, which led to a drop in the supply of villas and large luxury apartments. In recent years, land supply has been concentrated in providing small-sized flats and flats with sale price limits. At the same time, property developers are facing strong competition in selling their luxury projects. To hit targeted profits and avoid being neglected by the market, developers are hoping to create unique and innovative luxury units.
More importantly, to attain the highest profit, developers have adjusted the timing of their project launch dates. In fact, potential buyers are usually wealthy enough to buy luxury properties outright, as if they are immune from the government’s policies. Nevertheless, due to a continuous imbalance between supply and demand and while the city’s overall property market appears to have set off its downward cycle, Beijing’s luxury property market is forecasted to have another remarkable year, assuming that there are no major changes in housing policies. 

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