Property market to stand firm after Games
Updated: 2008-08-13 07:06
By Raymond Ho(HK Edition)
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Some analysts are worried about Beijing's property market in the post-Olympics period. Their main concern is: the capital's real estate market has reached a point of inflection and will deflate following the Games - exactly what happened with some other nations that hosted the Games.
This claim does not hold true. Certainly the market is undergoing a correction in which inferior supplies and fragile real estate businesses are being weeded out. Yet it is not quite possible that home prices will plunge within months after the Games.
As what most analysts and economists believe, Olympics is a single multi-sport event that has no direct correlation with economic cycle steering the way for the property market.
Home prices in Beijing jumped by 11.4 percent last year, compared with an average rise of 7.6 percent in 70 major cities across the country, according to government figures. New supplies hit the market at an average price 3.5 times higher than in 2001 when Beijing won the Olympic bid.
Apartments in the vicinity of Olympics venues and along the new subway lines, where the government has spent billions in improving infrastructure and environment, appeared the most sought-after.
In the rental housing market, the rental values of luxury properties and serviced apartments were up 10 percent and 20 percent respectively last year.
When visitors leave the city after the Games, rental apartments occupied by them will be released to the market. Average rent is believed to go back to where it was in the last quarter of 2007.
After all, ups and downs in home prices coincide with economic rhythms. What happened to other cities that hosted the Games in the past will not occur to the Chinese capital.
First, both Beijing's GDP and population have been growing rapidly. It is believed that all the new amenities meant for the Games' participants will be used to meet domestic and tourists' demand afterwards.
Second, the scale of construction projects undertaken to refurbish the city's infrastructure and other amenities are unprecedented. All these investments are not only for the Games but also benefit Beijing as a whole and help quicken its modernization. And its positive impact could last for decades.
Debate on whether the property market was about to slide has been intense prior to the Games, particularly after prices in southern cities like Shenzhen led the decline in the second half of last year.
However, Beijing's growing population and continuous government efforts in further urbanizing the capital are fundamentals that will bolster demand and prop up home prices after the Games.
As of 2007, Beijing has a population of 16.3 million, of which non-Beijing residents account for 25 percent, or 4.2 million. In 2007 alone, a record number of 36,000 more people have arrived and settled in this bustling city.
The author is deputy managing director of Vigers Asia Pacific Holdings.
(HK Edition 08/13/2008 page3)