Lower supply to push up Beijing prices

Trend forecast to be upward in second half of year, with many new housing projects expected to be high-end

Beijing's home prices may continue to rise in the second half of the year, backed by a lack of new supply, industry analysts say.

Additional supply in the new home market is expected to continue to decline, and the majority of new supply will be located outside of the capital's Fifth Ring Road, according to a report by international real estate consultancy company Savills.

Meanwhile, future supply located inside the Fifth Ring Road will continue to be high-end projects, of which the Chaoyang and Fengtai districts are the main areas.

Despite both declines in the delivery of new home supplies and transaction volumes, the firsthand residential price index continued to grow, up 5 percent quarter-on-quarter and 17.1 percent year-on-year by the end of May, statistics from Savills show.

Ines Li, associate director of Collier's research department, says she thinks the price in Beijing will still grow in the second half of the year, given the existing supply and demand relationship.

"Currently, there are around 90,000 apartment units available for sale in Beijing. The stock of 110,000 apartments is usually regarded as a benchmark. If the stock is higher than that number, home prices will be under pressure," says Li. "The situation of demand exceeding supply will continue next year."

A research note from Hong Kong-listed Longfor Properties Co Ltd shows that its sales volume and price will remain stable in the third quarter while an influx of a number of new projects in the fourth quarter means its prices and transactions will see an increase again.

Longfor's sales surged 78 percent year-on-year to 38.6 billion yuan ($5.7 billion; 5.2 billion euros) in the first six months, reaching a record high, according to the company's statement to the Hong Kong bourse. The company is going to launch a villa project, The Orient Original, in Beijing in the second half of the year.

According to a research note from international real estate service provider JLL, a total of 541 units of high-end villas were sold during the second quarter, a surge of 106 percent quarter-on-quarter, and the price also climbed 5.1 percent.

Ocean Epoc, a villa project by Sino-Ocean Group, for instance, sold out its entire first phase within six months after it went on the market and saw sales of 2.5 billion yuan.

According to Zhang Dawei, chief analyst at Centaline Property, the demand and supply of Beijing's residential sector now stands at 8-to-1, thus fueling a price increase in the coming months.

Countrywide, the real estate sector continued to recover in June but at a slower pace, the National Bureau of Statistics said on July 18.

Fifty-five of the 70 large and medium-sized cities monitored by the NBS saw new home prices rise month-on-month in June, compared with 60 in May. Forty-eight cities saw a month-on-month existing home prices increase in June, down from 49 in May.

According to Liu Jianwei, an NBS statistician, housing price trends diverged in the different cities. Month-on-month increases widened slightly in first-tier cities in June but continued to taper off in second- and third-tier cities.