Chinese sanguine about potential of Beijing property market

July 29, 2008
Chinese sanguine about potential of Beijing property market
Analysts remain confident it will hold up after the Games

(BEIJING) Chen Jingnian is a confident young man with a mission -
ride the wave of Beijing's red-hot real estate market and buy a
luxury car before he turns 30.

Tempted by the promise of rich rewards, the 26- year-old quit a
university course that laid out a path as an IT engineer to instead
become a real estate agent.

'The salary of engineers is fixed, but the growth potential in the
real estate agent industry is much bigger,' he said, adding that he
planned to buy an Audi A6 worth around 500,000 yuan (S$99,600) within
three years.

'Many of our investor clients have two or three apartments ... and a
client I met last month holds more than 10.'

And like many analysts and industry observers, Mr Chen is confident
that the Chinese capital's real estate market will not deflate
following next month's Beijing Olympics - as has been the case with
some other Games host cities.

'I will stay in the industry,' said Mr Chen, who focuses on selling
apartments on the Olympic Green area with Century 21 Real
Estate. 'Maybe I will open my own company in the future.'

Prices in the Chinese capital jumped by 11.4 per cent last year,
compared with an average rise of 7.6 per cent in 70 major cities
across the country, according to government figures.

New apartments now hit the market at an average price 3.5 times
higher than in 2001, when Beijing won the Olympic bid, according to
data collected by real estate agency 5i5j, which has more than 300
outlets in Beijing.

Suites near the Olympic venues and new subway lines, the best known
projects covered by a US$40 billion government budget to improve
infrastructure and clean the city's environment, are the hottest
spots.

'The implications of ongoing infrastructure growth for Beijing's
urban development and the property market are substantial,' said a
report by real estate consultancy Jones Lang LaSalle.

Not only is navigating the city more convenient and less costly, the
completion of new lines and stations will also drive new property
growth in less developed areas, it said.

However, the fact that one square metre of a new apartment in Beijing
costs about the same as China's average annual disposable income had
stoked worries a bubble had developed that could burst after the
Games.

Sales this year turned sluggish after China raised the downpayment
requirement for second homes in 2007, after earlier hiking taxes and
interest rates to prevent the market from overheating.

Debate on whether the property market nationwide was about to spiral
downwards has been prominent in the Chinese media, particularly after
prices in the south led the fall in the second half of last year.

Analysts attributed the current volatility to frenzied speculation
during the market's rise, and an increasingly widespread 'wait and
see' attitude this year that delayed buyers' activities.

But Beijing's massive population and the fact that the city is in its
initial development phase, are fundamentals that will bolster demand
and keep post- Games prices stable in the city, analysts said.

'Beijing is a young man in terms of its growth momentum and
development stage,' said Zhang Yukun, a senior investment consultant
at property agency Centaline China.

'The Olympics is just an accelerator for the city, not an engine
without which the growth would stop.'

Even average consumers feel confident about the potential of the
city, which has a population of 16.3 million people and is still
growing quickly as people from around the country come to live in the
nation's bustling capital.

'The demand is strong - Beijing has so many newcomers every year and
many young people I know are still living with their parents and need
their own house,' said Liu Jing, a 34-year-old export company
executive from southern China who has her own apartment in the city.