Chengdu: A Change of Pace
May 24, 2011 - Chengdu
Chengdu, the 3,000-year-old capital of Sichuan Province, is embracing big changes. Modernisation, urbanisation and changes in lifestyle are making the city more comfortable to live in.
Cut through by the snaky Jin River and surrounded by farmland, the ancient capital is bursting with modern development. The highway from the airport leads to the city's south side, where luxury brands, department stores and imported cars populate the four-lane Tianfu Avenue and new buildings by international architects twinkle in the sun - the new Municipal Building by Paul Andreu and Polar Ocean World by RPVA Daniel Romero, as well as those under construction: the Opera House by Zaha Hadid Architects and Raffles Square by Steven Holl.
One of Chengdu's distinguishing factors is that despite its modern pulse, the locals still know how to enjoy life. Teahouses, the overwhelming aroma of hot pot restaurants and mahjong in the streets reveal Chengdu's laidback charm.
A High-end Property Market is Born Chengdu is high on the priorities of government strategies to develop western China. As the city develops, and lifestyles along with it, luxury developers are stepping in to take advantage of the tremendous opportunity and growth potential.
"Although high-end property emerged in Chengdu as early as a decade ago, it is only in the last two years that it has really loomed large," Peng Zhiyuan, Vice General Manager of local property consultancy Saga Organization, says. "In recent years, conflict between the demands of high-end customers and the market supply has become sharper, and the market segmentation makes the high-end market more clear-cut."
The city's genuine high-end products, Jinlin Peninsula, Tongzi Forest Section, Waterfront, Bridge County and the Cosmos, are just starting to enter the market.
In Peng Zhiyuan's view, the success of the Cosmos, a luxury tower by KWG Properties, lies in the experience the developer brought to the project. "It has received a high degree of recognition from local buyers thanks to its geographic location and auxiliary facilities, its concept of integrating a swimming pool into every large flat floor and its independent pilot areas. KWG Property has grafted its successful experience in the coastal area onto this city," he comments.
Though priced as high as US&4,452/sq m, the Cosmos is still an excellent seller. Another top product in Chengdu is Longfor's Bridge County, a villa project launched in 2008. Located in the Muma Mountain area, the project has established a new benchmark for villa communities with its excellent landscaping and private views from stand-alone buildings.
"Although house prices in Chengdu have remained almost in tandem with the national market, the rise, in my view, is still remarkable, and the price of quite a lot of projects has almost doubled in comparison with their lowest point in 2008, leading to a wider gap between house price and local income," says Lester Jin of the Research Department at CBRE in Chengdu. In his opinion, local house prices, though not comparable with first-tier cities, are still rising quickly.
Jin cites Twenty-Four City of Huarun (a project by China Resources) as a typical example. "The project was priced at US$1,113/sq m when it launched at the end of 2007. Later its price dropped to the lowest point, US$742/sq m in 2008, but picked up all the way last year to the present US$1,781/sq m."
Last year, Chengdu's transaction volume was 12 million sq m, but only 10-15 percent of this was made up of high-end products. "The luxury market still has a lot of room to grow," Lester says. Currently, local buyers still play a leading role in purchasing properties. However, with the entry of many foreign-funded real estate developers such as Hutchison Whampoa ltd, Poly Group, Sung Hung Kai, Wharf Holdings, Kerry Properties, Chinese Estates, Kepple Land, Capitaland and American Tishman Speyer Properties, it's clear that new overseas buyers will be drawn in. The Excellency, a branch of SingLand in Singapore，has attracted a lot of its native buyers and even buyers from Malaysia and the Philippines, experienced buyers who anticipate growth in the market and price appreciation of products located in metropolitan areas.
According to Peng Zhiyuan's estimates, "Chengdu will embrace another round of doubled house prices in about three years."
To date, local developers have been most successful with local buyers, who tend to prefer residences with large balconies, French windows and attractive views in communities with a range of supporting facilities.
Luxehills International Community is typical in this regard - spread over 2.86 million sq m on the southern outskirts of Chengdu, it ranked first in China in terms of sales volume of stand-alone villas in 2009.
But the success of Luxehills, Luo Liping, President of Chengdu Wide Horizon Investment has observed, is one of strategy. Lipeng brings an international perspective and background in investment and urban planning to his role as developer of the large project on the outskirts of Chengdu.
Based on studies of various emerging cities overseas, Lipeng believes Chengdu is poised for a proliferation of upscale, and large-scale, suburban communities the newly rich can reach by car. Guided by this judgment, Wide Horizon clinched this suburb area where the plain meets the hilly country. "Having been trapped in the plain area for years, local Chengdu people prefer hills."
Wide Horizon adopted the overseas PUD（Planned Unit Development）mode, whereby the project layout is planned and developed in separate stages, and invested heavily in design, bringing in international design teams including Dowling Group, Development Design Group, JMP Golf Design Group and James Nicolay Design. Luo Liping says he hopes to become known as the "Apple of real estate" for focusing on design as well as performance. Having found a position in the market, and a balance between market demand and his company specialty, Wide Horizon plans to follow in the footsteps of Luxehills International with its own brand of large-scale luxury.
Another local developer, BRC, brings 20 years of experience to its command of Chengdu's mid-range market and is in the middle of a strategic restructuring period. It will launch three high-end projects, Win Mansion, Grand Hill International Community and Residence 1881, in Beijing and Chengdu. "The changes in the demands of high-end customers constitute a national trend, which, along with the growth of China's economy, has also taken a new direction featuring more comfort and more individuality," says Pan Rui, Assistant President of BRC. "[The plan] is a response to the development of the market."
Residence 1881 is the first manifestation of this vision and integrates a range of customised features - many of them new to Chengdu, including high-tech green technologies, fingerprint door locks, an intelligent home system, and even a socket in the dining table to cater to the local fondness for hotpot.
"People in Chengdu are generally curious and open-minded," Pan Rui says. "Traditional residential areas are still very popular, but the development of the city is introducing new hotspots like Huayang, Muma Mountain and Jintang to the market. These will capture the attention of the market provided that they are a superior product." Pan Rui gives Grand Hill International Community as an example, a BRC project in Jingtang which introduced golf as a lifestyle feature and has a picturesque landscape appealing to people's desire to get back to nature.
Expensive high-rise properties in the commercial centre have monopolised the market over the past year, and another 10 high-end towers will be launched before the end of 2010, including Residence 1881, Win Mansion, Cloudy Cotton, Arcadia Court and Longfor Century View, which have not yet made their formal debut. Generally, the southern section of this city will serve as home for the bulk of present and future high-end real estate.
Villas have experienced rapid growth in recent years, in downtown, on the outskirts and in the outer suburbs of the city. Established brands are expected to take advantage of suburban areas which already have developed infrastructure, including Wenjiang, Longquan, Bixian County and Xindu.
Meanwhile, projects to look out for include the conveniently located Diamond Bay in Longquan, Great Master in Wenjiang and Poly Lafitte Manor in Xindu.
What Chengdu already offers residents is its natural resources, rare in most of China's first-tier cities - beautiful landscapes, mountains and forests. The remaining challenge for developers is to follow sophisticated urban planning models and create high-quality products that are truly worth the cost, allowing modern Chengdu to live up to its catchphrase, coined by the famous director Zhang Yimou, as a place "the passing traveller is reluctant to leave".
Source: LP Luxury Properties
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