Driven by rising land costs and speculative investment, Beijing's property market is poised to keep growing robustly in the new year after reaching a seven-year peak in average flat prices in the last quarter in 2004.
``We expect a 20-30 percent rise in the mid- and high-end market this year,'' Jerry He, a vice-president at the city government-backed
Beijing Capital Land, said.
A big reason for the projected run-up in flat prices is the delayed impact of a government-imposed clampdown last September on the availability of land for new construction, part of Beijing's efforts to cool the economy.
``Flat prices are on an upward trend because land supply fell 60 percent last year,'' He said, adding that land costs rose 25 percent in 2004.
In a bid to curb property speculation and control the amount of land made available for development, the government last August began requiring that all land be sold at auction rather than sold directly to single developers. It also insisted that the land be fully paid for within 60 days. According to official figures, the average property price in the capital rose 6.5 percent in 2004 from year-ago levels to 4,747 yuan (HK$4,474) per square meter. The price of the average flat surged 6.3 percent.
Another state-owned property dev-eloper,
Beijing North Star, agrees that land costs will send flat prices higher in 2005. ``Some property developers, which do not understand the market, expanded aggressively and competed irrationally in the auctions,''
Beijing North Star's chief executive officer, He Jiangchuan said.
There is little doubt the soaring price of residential real estate in the capital has been a magnet for investors. Despite the austerity measures,
Beijing recorded a 22.6 percent rise in residential investment to 77.6 million yuan last year.
Tianjin-based property developer Sunco, for instance, which reached sales of 10 billion yuan in 2004, earlier said it will buy 150,000 sq m of land in
Beijing this year.
Peking University professor of eco-nomics Wang Yuesheng expects a 10-15 percent surge in the city's mid- and high-end flat prices in 2005. ``They are driven by speculators.'' Of the 24.72 million sq m (equivalent to a year-on-year increase of 30.4 percent) of flats sold in 2004, 17 percent were bought for investment even as the vacancy rate stood at 13 percent, according to the
Beijing Statistics Department. Property agencies said half of the transactions were investment-related.
``Many buyers are not buying one flat only. They are buying a few luxury flats for investment purposes,'' Jason Yang, manager of the consultancy & research department at Colliers International Property Services (Beijing), said. He reckons demand will remain strong, and that prices will keep rising, at least until the Olympics in 2008.
Wang figures that property speculation will not reach the heights seen in
Shanghai since the capital has more land available for development and a larger stock of housing.
The
Shanghai municipal government has tried hard to cool the property market by providing over 9 million sq m of medium- and low-priced residential land supply this year, compared to 3 million sq m built last year.
