Full Steam Ahead To 2008
Beijing's property prices show no signs of abating before the Olympic Games
By Mark Godfrey------
China's capital is currently a patchwork of construction sites, with several huge projects under construction in the central business district alone. City officials have ruled that all new real estate projects within the city's fourth ring road must be completed, structurally at least, by 2006.
This will allow Beijing to be completely ready for the 2008 Olympic Games, and to ensure that on the day, the city is unsullied by construction cranes.
The city's northeastern suburbs, meanwhile, have become a hotbed of villa construction, with expats and wealthy locals headed towards detached housing developments with names such as Home Of Tycoons.
Kevin Qin of DTZ's Beijing office has a very positive view on the city's real estate sector. He sees property prices rising through to 2008, "The better time to buy is now because after 2006 there won't be any new properties coming on stream - the supply will be tighter and prices will rise."
Real estate prices in Beijing have plenty of room to rise, he argues, in that prices in Shanghai are higher and Beijing is still cheap compared to other international cities.
Location is becoming more important in a maturing market, Qin says, with prices for new villas and apartments in Beijing's upscale Chaoyang district now running at RMB 12,000 per square meter. "Properties south of the city and further north can be had for RMB 7,000 or RMB 8,000 per square metre, but as an investment it could be hard to get as good a return on these," Qin continued.
South Korean parallel
One company that knows something about Olympics-fuelled real estate booms is South Korean conglomerate LG. Nearing completion is the LG Towers on Jianguomenwai Street, the main artery through Beijing's central business district in the eastern part of the city. LG expects a steady flow of foreign investment into Beijing, up to the Olympics, to help rental takeup of its office space.
"Seoul is a good example for Beijing," says Yuhn-Sihk Pahk, president of the Korean Chamber of Commerce in China and chief executive for real estate development at LG Beijing. "It became very well developed through hosting the Olympic Games in 1988. Prices in Seoul rose significantly.
Beijing will follow similarly: there's great potential for the real estate market here and the Olympics will be a special stimulus."
On the face of it, the prospects look good.
Beijing's GDP rose 15.4 percent year-on-year in the first part of 2004, according to Yu Xiuqin from the Beijing Municipal Bureau of Statistics.
New real estate developments came up to RMB 49.02 billion, up 24.2 percent from the same period last year, even though the city officials tightened up the land market and reduced the number of designated business parks from 470 to 28 in the first half of the year. The municipality has also tried to cool the local construction sector by canceling or delaying 607 projects worth a total of RMB164 billion.
There is plenty of Olympics-related cash sloshing around in Beijing. Liu Zhi, deputy director of Beijing Municipal Development and Reform Commission (BMDRC) told an investment symposium earlier this year that Beijing's total investment in Olympics infrastructure and housing would exceed US$180 billion.
Foreign-funded enterprises have been driving the sector's growth, at least in part. In the first half of this year, 859 foreign-funded enterprises were approved by Beijing authorities - which translates to about US$1.72 billion worth of investment, according to official data.
Rising incomes in the city are also helping to boost the residential sector. Disposable incomes were up by 11.4 percent in the first half of the year.
Properties on Chang'an Avenue in the city's heart have generally kept their rents steady and are reporting high occupancy rates.
Unequal growth
In a recent press release, Oriental Plaza near Tiananmen Square reported 90 percent office occupancy. But other high-end properties are not so lucky. Kerry Centre in the east of Beijing reports occupancy rates of under 60 percent, and an official there said rents were under serious pressure.
"Prices are artificially high," says Winston Leung, a Hong Kong media executive with ten year's experience as a tenant in various office spaces in Beijing.
"When the foreign media writes about Beijing real estate they only look at the prestige projects.
They quote the prices at Guomao and at Wangfujing. There's lots of more low-key, quality space in the general CBD area where prices have dropped rather than risen," said Leung. "When really big projects like Soho came on stream they kept the prices low. There's a lot of available office space out there."
Leung predicts prices will remain steady up to 2006, by which time, Beijing will have several new commercial and residential developments, including the one million square meter China Central Place and 700,000 square meter Beijing Fortune Plaza, both in the eastern CBD area.
Financial Street in Xicheng district to the west of the city centre, will have a massive three million square meters of office space coming online by 2007, while Beijing as a whole will have 1.15 million square meters of additional top-grade office space for rent by the end of next year, according to the latest quarterly report by property agents Jones Lang LaSalle. The city's annual take-up rate currently is only 350,000 square meters.
Beijing's real estate sector is set to boom until the Olympics, but few real estate players are keen to predict what happens when the games are over.
Many players are counting on an influx of foreign companies to rent new real estate coming onstream, but China's "ambiguous property policies" and "unsatisfying estimated profit" are holding back international investors from investing themselves, said David Hands, managing director of Jones Lang LaSalle's Beijing office. "Overseas investors are keen to cooperate with Chinese developers, but for now they're worried about the uncertainty of investment risks."
Not all are so hesitant. The ease of arranging mortgages with foreign banks is drawing foreigners into the Beijing real estate scene.
Financial analyst Jason Cooper recently purchased an apartment in the Park Avenue development near Chaoyang Park in northeastern Beijing with the US$200,000 price tag covered by a mortgage from Citibank. Cooper expects a good return on the investment. "It's a good price now. The Olympics will grow that price.
"It's hard to see how you could lose."
|
