Boom times to return for luxury homes, dwellings

Industry insiders say property prices are soaring in Beijing and Shanghai

Supply and transactions in Beijing's luxury property market are forecast to reach a record high this year, fueled by soaring land prices, experts say.

Guo Yi, marketing director of real estate consultancy Yahao, says sales of projects in the capital valued about 20 million yuan ($3.03 million; 2.69 million euros) a unit reached 470 in the first five months of this year, triple the number in the same period last year. The average price also increased by 15 percent year-on-year.

Statistics from real estate brokerage Centaline China show more than 60 projects with units costing more than 100,000 yuan a square meter will enter the Beijing market this year.

Sun Hongbin, chairman of property developer Sunac, believes there is still room for top luxury projects in the capital: "I won't be surprised if there are projects with units priced at more than 400,000 yuan or even 500,000 yuan per sq m."

The highest priced unit in Sunac's One Sino Park project costs in excess of 300,000 yuan per sq m, making the project the most expensive in Beijing, if not the country, he says. The company bought the land for this project in 2013 for 730,000 yuan per sq m, the highest amount paid for a parcel of land that year nationwide.

According to Guo, the local industry definition of a luxury apartment in terms of value per square meter has more than doubled in the past five years. Before 2010, he explains, apartments priced at 30,000 yuan per sq m could be defined as luxury, but this year the entry level has been increased to 70,000 yuan.

The soaring land prices are a major driving force behind the skyrocketing home prices, he adds.

Industry data show the national average for the cost of residential land jumped 36 percent year-to-year in the first quarter to 2,424 yuan per sq m.

As land supply in China's first-tier cities is falling, and as more enterprises choose to seize land parcels in Beijing and Shanghai due to lower potential risk, the land prices in those cities have seen a bigger price increase. Land prices in Beijing's suburbs, for example, have surged to more than 40,000 yuan per sq m.

Li Liang, deputy general manager of Longfor Beijing, says there is still potential in the capital's luxury products, especially in new areas in the south and east. The company has started several high-end projects with major developers, betting on the surging opportunities brought by new plans, such as the capital's second airport and a fourth embassy district.

"The major customers of such luxury products are those new rich aged 30 to 40 who mainly work in finance or IT," Li says.

huyuanyuan@chinadaily.com.cn

(China Daily Africa Weekly 06/17/2016 page31)