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A Quarterly Overview of Beijing Residential Market(4Q2004)

2005/03/15

Market Review

Unlike the market situation in the same period last year, the residential market this quarter was not affected significantly by the traditional low season. Overall market rentals and vacancies remained stable, although developers and landlords of serviced apartments and high-end villas lowered their asking rentals as many of their tenants are expatriates and have left Beijing for the winter vacation. Apartments for lease continued to enjoy strong demand, leading to slightly higher rentals and stable occupancies.

Supply

While some new units for lease were launched this quarter, overall stock in the luxury apartment leasing market saw little change. The market also saw few new villas this quarter, with overall stocks remaining largely stable. Likewise on the sales front, few luxury apartment projects were introduced to the market this quarter, and their impact on the market was insignificant.

Table 1 New Leasing Supply in Q4, 2004

District	Project Name	Total Units	Unit Area(gross sq.m)	Asking Rental(US$/unit/month)
Dongcheng	Park Avenue International Apartment	156	85-214	1,800-3,600
Chaoyang	Park Avenue	128*	147-217	2,000-5,000
Chaoyang	Beijing Golf Palace	120*	270-560	3,500-9,000

Remark :*Including units occupied by landlords

Table 2 New Projects in Q4, 2004

District	Project Name	Total Units	Unit Area (gross sq.m)	Asking Price (RMB/sq.m)
Chaoyang	Language International Phrase I	800	60-220	9,780
Chaoyang	Guoxing Guanhu Garden Phrase I	168	117-400	10,800
Chaoyang	Park Apartments Phrase I	160	246-265	13,900
Chaoyang	Napa Vally Phase III	70	420-500	14,000-18,000
Shunyi	I-House Phrase I	90	200-330	1.5-4 million/Unit 150-400

Rental Prices and Vacancies

This quarter, performance was mixed for the luxury residential leasing market. In sum, the average rental of leasing apartments rose by 1.9 percent, but that of the serviced apartments dropped by 1.5 percent. Overall vacancies remained stable.

The number of foreign senior executives newly moved to Beijing dropped this quarter after the peak season. Meanwhile, some expatriates left the capital for vacation. As many of them are tenants of serviced apartments, demand for this category dropped in fourth quarter of 2004. To attract tenants to their projects, developers lowered their asking rentals. Rentals for high-end serviced apartments dropped from US$27.30/month/sq.m in the third quarter to US$26.50/month/sq.m in the fourth quarter, while the average vacancy rose slightly from 17.9 percent to 18.7 percent.

As for trends related to the leasing apartment market, initiatives of staff localization continued across many multinational companies. Business expansions resulted in an increasing number of middle management staff. With lower housing allowances, they usually choose to live in mid-range or low-end leasing apartments. Driven by demand, rentals for leasing apartments rose to US$15.20/month/sq.m during the fourth quarter from US$14.90/month/sq.m in the third. Vacancies were stable at 21.4 percent.

With many expatriates and their families back home for vacations during the year-end period, villa demand fell, leading to a 2.4 percent drop in average rentals. However, some projects that accepted occupation earlier this year have successfully increased their occupancies through marketing and the establishment of a more mature living community. The average vacancy rate for villas was brought down further to 10.8 percent this quarter.

Table 3 Rentals And Vacancies in the Beijing Residential Market

Sales

The high-end residential sales market remained positive and prices increased slightly. DTZ's surveys showed that the high-end residential price index for Beijing was 98.6 in during the fourth quester of 2004. Price growth was most significant for Chaoyang Park and in the CBD.

Market Outlook

Strong economic growth and further market liberalization in China will induce more foreign companies to invest or expand in the country. This, in addition to bringing more expatriates to China, will increase the number of middle level managers. This will generate demand for serviced apartments. In terms of supply, two-building serviced apartments in the Palm Springs International Apartment complex will enter the market during the first quarter of 2005. Rentals of serviced apartments are expected to be stable.

More luxury leasing apartments will enter the market after the Chinese New Year. However, because of strong demand, rentals and vacancies are expected to remain stable despite an increase in supply.

As expatriates return to China after the Chinese New Year, leasing demand for luxury villas will increase. With limited supplies, rentals are expected to go up while vacancy rates are expected to fall.

On the sales front, such investment hot spots as Chaoyang Park and CBD will not see strong new supply in the short term. Brisk demand will leave room for price increases.



	Article featured in Business Beijing, March 2005 Publication sponsored by Information Office of the Beijing Municipal Government, Beijing Municipal Bureau of Commerce, Development & Reform Commission of Beijing Municipality, China Council for the Promotion of International Trade (Beijing Sub-Council)