Beijing Land Prices Set to Rise after Years of Softening

Steven Schwankert | Jan 10, 2015 9:00 am | 9 comments | 12837 reads

Beijing home prices could reach RMB 60,000 per square meter for the first time in 2015, after a record land sale seems to foreshadow a year of expansion for development and a rebound in real estate values.

A large plot in southwestern Beijing's Fengtai District sold on January 5 for almost USD 1.4 billion, a new record for real estate in the capital. The mixed use site could yield as much as 418,693 of mixed use space.

That a developer, in this case China Resources, was willing to pay so much for a site in Fengtai, long considered a Beijing backwater (it was the last Beijing district to get a McDonald's), demonstrates two things about the local real estate market: demand for space, especially residential space, in Beijing remains strong, and the supply of available space, especially in or near Beijing's Central Business District (CBD) is very limited.

The desirability of Beijing real estate is expect to rise as the city's integration with nearby Hebei province and Tianjin municipality increase. New subway lines, such as an extension of line 6, have brought suburban areas like Yanjiao, just over the Hebei border, are reducing commuting times, allowing more people to buy home around Beijing, and have increased the value of closer locations as they become more convenient.

Although real estate prices soared during the lead-up to the Olympics, rents were at first slow to keep pace. While softness in sale prices has made renting a bit easier over the last few years, Beijing residents should expect a similar rebound in rental prices in 2015.

Photo: World Property Journal

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admin's picture admin Submitted by Guest on Tue, 01/13/2015 - 09:21

britomart wrote:

So... does this mean that rents are dropping? Or will drop in the near future?

You would think so -- but there's been an oversupply for years and still rents have gone up.

Strange ... normal market forces don't seem to apply here

 

Books by current and former Beijinger staffers

http://astore.amazon.com/truerunmedia-20

cdn_china's picture cdn_china Submitted by Guest on Tue, 01/13/2015 - 01:03

I think both positions, above, are correct.

1) From an economic point of view, prices are grossly inflated, and there should be significant downward pressure; HOWEVER,

2) China has a huge population, and the movers & shakers in 2nd and 3rd tier cities want to reside in Beijing (influence, schools, medical, etc), so the demand for residences in Beijing continues to rise, causing an upward pressure on prices.

admin's picture admin Submitted by Guest on Mon, 01/12/2015 - 13:46

No we don't have the resources to do the research for what you are suggesting. We're an entertainment mag that occasionally posts news articles we think are relevant to expat life here. Cost of living affects us all, so we call attention to indicators such as the above.

I certainly agree there's a bubble, and I'll bet you're right that it'll pop one day. But I've been reading stories about this bubble popping every year since 2008, but still these transactions go higher.

I think the market forces that dictate property prices are distorted here by:

1. pent-up demand from almost 50 years of not allowing private property purchases

2. The fact that as the political capital of China, every wealthy / influential person/company nationwide wants property in Beijing, because of the necessity of being here to curry influence with the powers that be

3. Things like this: 71.8% of single women surveyed will not marry a man that does not own an apartment, a figure that the article notes has risen dramatically since last asked in 2012

 

Books by current and former Beijinger staffers

http://astore.amazon.com/truerunmedia-20

LarryBrown's picture LarryBrown Submitted by Guest on Mon, 01/12/2015 - 13:20

Overall it is an anomaly and special case. Please address the issues I raised and do REAL research...then write an informative article. Smile

Research realtor opinion

Research rent prices every month on the same open apartments

Research the increased avaiability of apartments for sale

Check out PMI and itys relationship to rea estate prices

Check expat flow and lesser amount money flowing into China from abroad

Go to the Better Business Bureau and check business leader sentiment

Research the declining GDP

Research stagnant wages

Research salary and house price discrepancies

Research all the defaults on loans in the past few years--many more coming

In short--do research and write an intelligent article. Can you do that? Or are you just capable of writing the simplistic opinions stated in the article? Good luck. I am waiting.

LarryBrown's picture LarryBrown Submitted by Guest on Mon, 01/12/2015 - 08:06

Furthermore go speak to realtors...they are not happy. There is any increasing glut of apartments for sale as people startbto rush to getout the door with their huge profits. Rents arw also jot going up. Expat flow has been negative as well..which added to higher apartment prices in some areas in the past.Rents are not going up..Again ..go to talk to realtors..they are not singing a pretty tune.

LarryBrown's picture LarryBrown Submitted by Guest on Mon, 01/12/2015 - 07:59

Prices will not rise outside the Business District. More and more developers are going bankrupt. Soured loans are increasing every day. Read the WSJ, Business Insider and Fortune. Kaisa, a major developer just defaulted on a big loan.The average salary of a college grad is about 3500 a month. You can only use your grandparents live savings every 40 years :)The discrepancy between salaries and house prices is highest here than just about any large urban area in the world. Throw in a softening economy about to go under 7% and a PMI under 50 is in the cards. Salaries also have not been rising. Houseowners have seen their house values go up to 20 times in the last 20 years..Many people think that is normal..well they will soon learn that that is not normal and what goes up will come down. Lastly throw in the anticorruption campaign which worries the super wealthy and deters them from buying multiple apartments. Beijing also has about 30% nonoccupancy rate. Prices will continue down.

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