Real estate sector heating up?
By Jia Hepeng (China Business Weekly)
Updated: 2004-07-19 14:18

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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