Growing demand for luxury residences in Beijing has been fuelled by wealthy locals and domestic buyers from neighbouring provinces.
July 24, 2012 - Beijing
In contrast with the established luxury residential enclaves of Hong Kong, Beijing's luxury market is still in its infancy. Projects remain scattered around the city's prime locations, such as the CBD, Lufthansa and Wangfujing, or areas which can offer access to greener surroundings, such as Yuyuantan and West Hill.
"Growing demand for luxury residences in Beijing has been fuelled by wealthy locals and domestic buyers from neighbouring provinces."
The CBD and Lufthansa are situated in the east of Beijing. Home to the majority of the city's expatriate community, these areas have attracted a large proportion of investment purchases with buyers targeting capital appreciation and rental yields. West Hill, on the other hand, is situated in the western part of Beijing, an area popular with domestic end users. Finally, Wangfujing represents the most central luxury residential cluster in the city.
Located immediately to the east of the Forbidden City, Wangfujing is recognized as one of the most popular commercial streets in the capital and houses a selection of five-star hotels, shopping malls, Grade A offices, and serviced apartments. With the renovation and upgrade of the Wangfujing commercial area in recent years, several luxury residential projects have emerged, including Imperial Mansion and Mandarin Court - launched to the market within the past year - and Legendale Hotel Apartment, which has recently been listed for sale. The total supply of apartments in the area has reached approximately 480 properties.
Construction activity in Wangfujing is predominantly focused on the development of commercial property. While a number of luxury residential projects are set to launch in the near future, there is still considerable scope for additional supply. Notable upcoming luxury projects include Royal Residences by CapitaLand and the third phase of Mandarin Court.
Growing demand for luxury residences in Beijing has been fuelled by wealthy locals and domestic buyers from neighbouring provinces. According to Hurun's 2011 Rich List, the number of individuals with a net worth in excess of RMB100 million increased to 10,000 in Beijing, up by 6.4% year-on-year, and increased to 60,000 in China as a whole, up by 9.1% year-on-year.
Home-purchasing restrictions, however, present an obstacle to future demand. Regulations imposed by the Beijing municipal government in February 2011 have set limitations on the purchase of residential property for the following buyers:
- Local households which already own two or more properties
- Non-local households which own one or more properties
- Non-local households unable to provide five consecutive years' worth of tax receipts or proof of social welfare payment in Beijing.
As a result of these regulations and a deterioration in market sentiment, the transaction volume for luxury projects in the Wangfujing area shrank from 29 properties in Q1/2011 to 13 properties in Q3/2011. Current regulations, however, are unlikely to remain in place in the long run and absorption is expected to rebound once the restrictions are lifted.
North bank of Yuyuantan Park, Haidian District, Beijing
Gross Floor Area: 590 sq m
Transaction Price: RMB75.8 million (RMB128,475 per sq m)
Transacted Date: October 2011
blog, apartment, luxury residences, investment