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Real estate sector heating up?
By Jia Hepeng (China Business Weekly)
Updated: 2004-07-19 14:18 Beijing's property market grew rapidly in the
year's first half, but analysts suggest that won't prevent the tapering of
soaring prices and the end of dwindling vacancy rates.
Those are among the findings in the latest report on Beijing's real estate
sector.
Due to the limited supply of quality office space, the average rent for a
Grade A office rose slightly in the second quarter, from US$24.60 per month per
square metre to US$24.90.
Meanwhile, the average vacancy rate dropped to 9.5 per cent, from 12.4 per
cent in the first quarter, indicates the quarterly report prepared by DTZ
Debenham Tie Leung Beijing.
"This marks the first time, since 2000, that quarterly office prices
continued growing while the average vacancy rate declined," Richard Lum,
director of DTZ Beijing told China Business Weekly.
The central business district (CBD), in eastern Beijing, was a booming
centre, in terms of office leases.
The strong demand and limited supplies caused the average vacancy rate in the
area to slip to 4.4 per cent in the second quarter.
Lum predicts that trend will be reversed, within months, after the completion
of major developments in CBD, along Beijing's Financial Street and several other
areas of the city.
From the latter half of next year, there will be an oversupply of Grade A
office space, DTZ's survey predicts. In 2006, there will be more high-quality
office complexes in Beijing. That will result in greater competition and, in
turn, lower rents.
The picture was also rosy for Beijing's residential real estate sector during
the year's first half.
Due to strong demand, the average vacancy rate in the luxury residence
segment fell significantly, indicates DTZ's report.
Demand for serviced apartments was stronger in the second quarter, and the
overall vacancy rate dropped to 18.1 per cent from 20.7 per cent in the first
quarter.
Among services apartments, the luxury and high-end units were highly welcomed
by the market, as they had a 12.5-per-cent vacancy rate.
Expatriate families were more interested in renting villas during the first
half of the year.
Due to limited supplies, resulting from China's tighter land-use policies,
the average rent for high-end villas rose 1.9 per cent, to US$21.70 per month
per square metre. The overall vacancy rate of villas was 15.1 per cent in the
second quarter.
"This is the result of a growing number of leading international companies
locating in Beijing, and their senior managers demand luxurious and cozy
lifestyles," said Angela Shew, director of DTZ Beijing's residential department.
Beijing's retail property market was also active in the year's first half.
Cumulative sales of consumer goods between January and May reached 88.9 billion
yuan (US$10.74 billion), up 18.5 per cent over the same period of last year.
Coinciding with residents' rapidly growing incomes, retail formats have
become more diverse, which has resulted in increased need for retail properties,
said Sunnie Wu, director of DTZ Beijing's retail department.
Property sales were strong in the year's first five months, in the wake of
the booming economy, said Philip Wu, director of City Integrated Residential
Services, a nationwide housing agent under DTZ.
In the first five months, sales of common housing units were 59.27 per cent
of last year's total volume.
Between January and May, 60,302 units of common housing were sold, up 114.24
per cent year-on-year. Meanwhile, 3,317 villas and luxury apartments were sold,
up 506.89 per cent over the first five months of 2003.
The average price of common housing was 5,838 yuan (US$705.07) per square
metre, up 0.61 per cent over the same period of last year.
Meanwhile, the average sales price of villas and luxury apartments rose 23.74
per cent, to 10,921 yuan (US$1,318.96) per square metre. That was the highest
growth rate in five years.
Three things contributed to the rapid growth, Wu said.
China's ongoing macroeconomic adjustment tightened land supply and credit,
postponed many developments and increased consumers' worries declining property
supplies will push prices up. That prompted a growing number of consumers to
purchase their housing this year.
Given China's booming economy, a growing number of foreign investors have
begun buying properties in the country. Their purchases have not been affected
by China's credit-tightening measures.
The outbreak of SARS (severe acute respiratory syndrome) last year scared
many potential home buyers, which contributed to the growth in sales this year,
Wu said.
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