High-end residential projects still popular in Beijing

Demand for high-end residential property continues to be robust in Beijing, with prices still high, said a report released on Wednesday, even as a land auction in Shanghai set a record.

From April to June, in the high-end Beijing residential market, the average price increased by 9.5 percent quarter-on-quarter to 56,307 yuan ($9,015) per square meter, said the report released by property service provider DTZ. Transaction volume reached 204,482.2 sq m, an increase of 2.7 percent from the same period last year, it said.

High-end residential property is defined as projects where the sales price is above 45,000 yuan per sq m for apartments and more than 30,000 yuan per sq m for villas.

"The growth in the sector can be attributed to the slight relaxation of government restrictions on pre-sale permits," said Zhao Yan, head of research for North China at DTZ.

Besides more high-end residential supply, on the demand side, high-quality, stable value and scarcity, and expectations of price appreciation prompted more buyers, including those scaling up, to make purchases.

In terms of market segments, villa transaction volumes saw a sharp increase of 41.4 percent to 89,098.2 sq m from the same period in 2013.

Meanwhile, the average price increased by 18.6 percent to 53,118.8 per square meter.

"Moreover, we saw a 15.2 percent decrease in luxury apartment transaction volume although the transaction price grew 7.8 percent quarter-on-quarter to 58,768.8 per sq m," said Zhao.

According to Zhao, high land and construction costs will bolster the high-end residential property prices.

However, the government's policies of restricting house purchases will remain a deterrent to many prospective buyers who are planning to scale up. "Real estate companies are expected to offer sales incentives in stages, which might affect the transaction price," said Zhao.

Property developer Poly Real Estate Group Co Ltd recently got the green light for sales of its high-end housing project Haide Park, indicating that Beijing is easing its home purchase restrictions.

The report said that in Beijing's high-end leasing market, the average rent increased by 0.8 percent to 175.9 yuan per sq m per month.

In Shanghai, Lai Fung Holdings, a Hong Kong-listed property developer and investment arm of the Lai Sun Group on the Chinese mainland, offered 577 million yuan for the land plot at Wuliqiao Street in downtown Huangpu District, with a premium rate of 62.54 percent from the starting price 355 million yuan.

The floor price of the 6,885 sq m plot near Huangpu River reached 85,810 yuan per sq m, breaking the former record of 73,099 yuan recorded in Beijing last year.

According to conditions in the pre-sale contract, development of the Wuliqiao plot should start within a year after delivery and finish within three years, which means sales of the apartment sitting on the plot should start no later than 2018.

However, Song Huiyong, a Shanghai-based property market researcher with Centaline Group, said that the project may face selling pressures as the floor price has deviated from the market, because housing prices in the neighboring areas are at relatively low levels.

"The floor price of above 80,000 yuan per sq m means the sales price must be higher than 100,000 yuan per sq m, which will be a tough goal for this area, especially with a possible downturn in housing prices," he said, explaining that the average price of nearby new apartments is between 50,000 and 60,000 yuan per sq m at the moment.

Zhang Hongwei, research head of Tospur Consulting, was more optimistic. "The scarcity of riverside plots has decided the high-end quality of the Wuliqiao project," he said.

"The plot will not only complement the limitations of high-end property development in the Lujiazui area but also inject vigor into the entire area along Huangpu River.

"We will witness the birth of another luxurious project with sky-high prices," Zhang said.