Beijing

Beijing witnessed a massive construction boom during the seven-year run up to the Olympic Games and unit prices soared amid rising demand. Apartment blocks, which currently comprise more than half the construction market in Beijing, sprang up across a city that by the time the Olympics wound down had been practically rebuilt. However, it looks very much like the global economic slowdown is bringing the good times to a sharp conclusion.
Since the end of the Olympics many of the city’s developers have found themselves lumbered with a glut of new apartments buyers are not taking up. Instant discounts of 15 and 20 per cent are being offered in numerous developments, but there still does not seem to be close to enough buyers. Home prices are falling by as much as one per cent per month and overall house sales are expected to fall by a third this year.

Inflation began rising dramatically last year and the government increased interest rates and ordered the banks to rein in their lending. However, the authorities restricted luxury property developments and tightened up overseas property ownership laws. As a result, prices for luxury housing remained high and demand is still buoyant.
Although developers have traditionally tried to hold on to properties rather than significantly reduce prices, some major companies have been knocking as much as a third off price tags.
The Olympics looked set to be a boon for the city’s developers, but environmental issues saw the banning of major construction projects throughout 2008. Developers responded by stepping up projects in the two years before the ban which led to a glut in supply.
However, in terms of fundamentals, the city is probably better suited to investment than at any time during the previous decade. Some USD41 billion has been ploughed into overhauling the city’s infrastructure and improving its environment as part of its role as Olympic host and prices are dropping back to competitive levels. Beijing is shooting up the list of the world’s most liveable cities and the rankings of business friendly locations. The coming years might be difficult, but with fundamentals as strong as Beijing’s means the Chinese city may be the first to emerge from the far end of the tunnel.

Condos
Recently implemented regulations dictate that foreigners in Beijing must prove they have worked or studied in China for more than a year before they are allowed to buy apartments or any other type of home in the city, and they can only buy for their own use. The only option for foreigners hoping to buy a unit which is not for their own use is to do so by first establishing a business in China.
There are a number of high quality condo developments to choose from in the city, with the recently completed Park Tower. The massive building was topped out in 2006 and claimed a spot as Beijing’s then tallest tower. It stands at a height of 250m and includes some 63 floors. The development contains a 237-room Park Hyatt Hotel, 32 Park Hyatt Residences and 228 apartments.
There are also a number of high quality serviced apartments available in the city, with Ascott International leading the field. The firm recently opened the Somerset ZhongGuanCun, its latest serviced residence in Beijing. This 154-unit serviced residence was acquired in August 2006, in line with the Group’s target to triple its portfolio in China to 10,000 units by 2010. The property is Ascott’s fourth in Beijing and was acquired from the Beijing Yuanzhong Real Estate Development Company for RMB302 million. The company is the largest international serviced residence operator in China and currently has over 3,600 units in 18 properties across the country.

One of the most sought after areas for ex-pats in Beijing is Chang An Avenue close to the Forbidden Palace. Although condo units are expensive on the strip when compared to other areas of the city, they are still consistently popular. Among recently-completed developments to have sold well is WGD architect’s Chang An Avenue Hotel/Office/Condominium Development, Beijing. The striking project cost some US$250 million to build and was a joint venture between WGD and WZMH architects.

Houses and Land
Beijing has been imposing increasingly strict control over land use in recent years. The Beijing Municipal Bureau of State Land and Resources has been steadily reducing supply which was down to 6,300 hectares, compared with last year’s 6,500 hectares. According to a plan released earilier this year, supply for new construction will be limited to 3,500 hectares, including 1,600 hectares for housing projects. Further, 220 hectares must be used for building houses for low-income families this year.
Land supply in downtown Beijing is supposed to be no more than 30 per cent of the total, while suburban areas will take the other 70 per cent. The plan gave priority to land use for the Olympic Games and urban infrastructure construction. The initiative lead to a land shortages and further contributed to price increases.

Renovating
There are a number of extremely interesting renovation options open in Beijing. Chief among them are the traditional old-style siheyuan (courtyard) homes in the downtown Houhai area of the city.
The walled residences were built for members of the nobility up until the communist revolution when they were divided up into smaller units and given to various officials and communist party members. Overcrowding, poor in water supply and filthy communal toilets meant the area quickly came to be considered as a slum. However, investors have been stepping in to restore the buildings to their former glory; and have been paying massive sums for the privilege. One was dilapidated example was recently sold for 110m yuan (about £7.1m). Those interested in this option will have to move fast as only 3,000 centrally located courtyards remain.