Top-end Beijing apartments face downward pressure
Serious competition is set to weigh on the capital value of Beijing’s high-end residential sector, industry experts say.
Although the loosening policy environment is expected to release some pent-up demand, high prices are expected to depress sales, according to a report from international real-estate services provider JLL.
“Many new projects are expected to enter the market this year. Therefore, capital values will still face headwinds in the coming months,” said Eric Hirsch, head of markets for JLL North China.
Supply in Beijing’s highend property sector is expected to increase significantly, as four new high-end apartment projects, combined with five new high-end villa developments, are scheduled to enter the sales market this year, with most projects posting prices of more than 100,000 yuan ($16,112) per sq m, according to statistics from Savills, another international real-estate services company.
Both the mass market and high-end market recorded very weak sales, property agents said. The massmarket sales volume fell by 30 percent in the first two months of this year from the previous quarter, due to limited new supply and the slower Spring Festival holiday period, JLL said.
The situation of the highend market was similar, with just 214 apartments and 37 high- end villas changing hands during the same period.
However, sales in both markets are expected to be lifted by the loosening of credit and favorable policies supporting the housing market.
Capital values declined slightly due to the low transaction volume. Primary values for luxury apartments and high-end villas fell by 0.4 percent in the first two months of the year from the previous quarter, and 4.6 percent from a year earlier, JLL said. Slower sales prompted some developers to cut prices.
Figures from Savills show a similar trend. High-end villa market transaction volumes fell to 196 units, down almost 50 percent from the previous quarter. Prices slipped by about 5 percent to an average of 50,100 yuan per sq m by the end of the first quarter of this year — up 6.9 percent year-on-year, Savills said.
“The home purchase restraint will remain in Beijing, thus weighing down average prices in the highend residential sector,” said Dong Yue, senior manager with Savills’ research department.
The launch of the Asian Infrastructure Investment Bank (AIIB) and “One Belt, One Road” initiative will promote renminbi internationalization and thus strengthen the purchasing power of Chinese people in other countries.
Against this backdrop, “investing in overseas properties is without doubt a wise decision”, said Zhang Hong, head of International Residential of JLL Beijing.
Chinese mainland outbound investments in the global real estate market amounted to 16.5 billion yuan last year, up 46 percent from 2013, JLL said.
Chinese mainland individual investments in overseas property markets in the first half of last year totaled $5 billion — much higher than in 2011 and 2012.
High prices are expected to depress sales of Beijing’s top-end residential sector. Slower sales have prompted some developers to cut prices.