Beijing Apartments market policies and outlook

Followed by the interest rates cut, tax reductions and relevant fee exemptions at end-08 to encourage consumption by local residence in the housing market, the government continued to create new policies, covering the demand side for temporary permission for home purchases by foreigners and conditional second home buying for living improvement, as well as the supply side through land supply and relaxing capital requirement on developers, in an effort to boost the local residential market in 1H09. We trust that the wide spectrum of policies should bring about an impetus to the residential market.

The bottomed out economy, with an expected steady growth in 2H09, should give more support for the fundamentals of the local residential market. With residents’ income growth and stock rally in the past six months, a steady growth of transaction volume should continue in the Beijing housing market.

Given the ongoing market improvement, it is unlikely that the market will receive further significant preferential policies in 2H09. However, the recent restated moderately loose monetary policy by the State Council should be categorised as an important factor influencing the market, even though banks continue to tighten on second-home mortgages and strictly review the applications for purchase, in order to curb speculation by the falsification of owner-occupancy to enjoy the lower down payments and discounts on interest rates.

On the supply side, local government will continue to offer more land to the market, especially in the Chaoyang, Tongzhou, and Daxing districts, as an effort to prevent excessive acceleration in housing prices. As a consequence, the trend of housing supply decentralisation is foreseen in the following years, while housing supply in urban areas will continue to tighten.

On the demand side, foreigners should grasp the temporary preferential housing policy and continue to source mid- to high-end projects, including luxury apartments and villas, in traditional business areas like the CBD and mature living neighbourhoods like Shunyi. Local buyers will take more into consideration housing locations which are easy connected or accessible to transportation hubs, shops, schools and hospitals.

Housing prices, in a short period, will move randomly in expectation of developers and the buying activities of owner-occupancy individuals and investment. But in the long run, a steady price increase should be expected in the local market, both low-to-mid and luxury properties, as housing demand in Beijing should continue to grow every year, along with increasing highly skilled and educated working people undergoing capital city urbanisation.
update time：2012-2-4