Guangzhou

In 2007 a wave of international hotel brands arrived in Guangzhou. Among them was Starwood Hotels & Resorts and the Marriott International which revealed that a Guangzhou branch would be among some 18 new hotels it expected to open across China by 2012. Retail development has been giving developers immense returns which has in turn raised demand for Grade A office space. Guangzhou’s per capita disposable income and the living expenditure of its high-income household segment have risen at a faster rate than that of its average income household segment. The phenomenon not only indicates a widening income disparity but an emergence of more affluent consumers.

A huge amount of foreign investment capital flowed into China’s real estate market last year. In the first half of 2008, realised foreign investment in the property sector accounted for 24.1 percent of the country’s total used foreign capital. This was some 11 percentage points higher than the whole of last year, and Guangzhou drew more than its fair share. However, there are indications that the global financial slowdown is beginning to beginning to make its presence felt and 2008 year end figures are expected to show a marked decline in overseas investment in Guangzhou’s property sector.
China is still one of the more attractive options for international investors determined to put money into property and Guangzhou, with its young population and liberal, international outlook, can provide a standard of living beyond what is on offer elsewhere in the country. As with elsewhere in China, all land in Guangzhou is the property of the State. The state does however sell land usage rights to the developers of property projects and the owners of the property can hold a lease of up to 50 or 70 years depending property type. It is not defined what happens at the end of this 50 or 70 year period although the most likely scenario is that leases will be renewable.
Condos
The average price of a new apartment in Guangzhou hit a record 7,524 yuan (US$964) per square meter last year despite the government’s efforts to keep property prices stable.
According to statistics released by the city’s land resources and housing management bureau, more than 7,200 residential apartments, covering a total space of 820,000 square meters, were sold in the last month of 2007. The figures represented the biggest buying rush since the government implemented measures to control the property sector in 2006. Experts attributed the price rise to the bullish sentiment in the stock market last year, which brought in extra income for local market players.

However, the global slowdown is beginning to bite and property purchases are significantly down despite the fact that developers have been offering considerable discounts on units. The slowdown in property purchases has meant that many of the 90,000 residential apartments which went on sale last year have yet to be bought, which will in turn mean less builds in 2009. It is difficult to say when Guangzhou will emerge from the lag in property prices and sales, but it will largely be dependent on the global economy and whether the Chinese government will continue to introduce harsh anti-property speculation efforts.

Houses and Land
Experts are predicting that the trend for houses in Guangzhou for the remainder of 2008 and the first half of 2009 will be volatile. House prices in the city are expected to face structural rises and falls, with prices for houses below 90 sqm slipping. However, many speculate that houses of above 90sqm may remain buoyant, at least by comparison with smaller and cheaper units.
The broader picture however, is looking more negative. Feng Ke, director of Beijing University Real Estate Financial Research Centre, has predicted that some one-third of China’s real estate enterprises may be ousted out of the market by the end of 2008 due to high assets liability rate, which stands around 75 per cent for Chinese real estate enterprises. That would mean around 17,000 firms could be wiped out with the global downturn and China’s stringent policy aimed at curbing speculation and keeping property prices down the likely culprits.

Renovating
Although Guangzhou is one of China’s most modern cities, there are a number of houses built before the Communist revolution 1949 which offer renovation opportunities. Many however, have severe problems with electricity, pipes and plumbing. That said, there are many well renovated and charming old houses which tend to prove particularly popular among renters.
Historical buildings with old renovated apartments are more expensive than units in new residential compounds, despite sometimes suffering from rusty water pipes and insufficient electricity to power an expat family’s air conditioner in summer.