A collection of Beijing news, Chinaview and Economic Observer News reports on Beijing property price since 2008.10.28 to 2009.08.10, media get to know the reason why the price can't get down, and the hard life of unhoused Chinese people.
Beijingnews reported on 2008.10.28:
China's top economic planner, the National Development and Reform Commission House, said house prices in Beijing in September dropped a fraction of a percent from the previous month, the first decline since 2005.
The government announced a series of policies last week to encourage house sales, including lowering the down payment from 30% to 20% for those buying their first home.
But many potential buyers are still taking a wait-and-see attitude.
"I don't urgently need to buy a house. So I plan to wait for some time."
Real estate developers have been trying to attract buyers with discounts since the end of last year. The price for some residential units in Beijing dropped by 35% compared with last year.
Yu Minxuan, deputy director with the Real Estate Research Centre at Renmin University explains why developers are choosing to reduce their house prices now.
"For many property developers, cash flow is one of the most important things."
September and October are traditionally popular months for home sales. But according to official statistics, during the 7-day National Day Holiday last month, sales in Beijing plunged by about 20%, as compared with the same period last year.
Chinaview reported on 2009.01.22:
The average house price in Beijing will plummet by as much as 20 percent as buyers snap up cut-price homes, according to the Beijing Academy of Social Sciences.
The average cost could even reach as low as 8,000 yuan ($1,170) per square meter in the coming months, it said in its Beijing Economic Development Report this week.
The stagnant housing market during the financial crisis and the influx of cheap price-limited condos are the main reasons for the drop, Tang Yong, assistant researcher and one of the authors of the report, said.
Price-limited condos, which have been backed by the government, are available only to families whose annual income is below 88,000 yuan and whose total assets are worth no more than 570,000 yuan.
Projects covering an area of 2 million sq m will be completed this year, with work set to start on another 8.5 million sq m, municipal government documents show.
"The government supported a few such projects late last year. It is the peak time for contracts to be signed in the next couple of months, which should add a touch of vitality to the housing market in Beijing," Tang said.
The properties have proved so popular, Zhao Bing, a salesman with Jinding Yangguan, a real estate developer specializing in price-limited condos, said his company had almost sold all 3,900 flats in Shijingshan district.
"We are still receiving enquires," he added.
"I am looking to buy a flat after Spring Festival and the price-limited condo will be a really attractive option," a teacher surnamed Liu in an elementary school in Fengtai district said.
"But I also have concerns the general housing market will see a further fall so that the price of commercial residence will be lower than price-limited condos favored by the government."
According to Tang, however, the general housing market will not suffer a significant drop this year due to the central government's adjusting policies.
"On the contrary, prices may bounce back a little in late 2009 when the economy gains back power," he said.
Economic Observer News reported on 2009.08.10:
Several days after a plot of Beijing land sold for a record price at a government land auction, the price of second-hand apartments at nearby properties shot up to 16,000 yuan per sqm, some 4,000 yuan per sqm higher than what they were selling for earlier in the year.
This rapid jump seems to support land developers' claims that housing prices are being driven up by increases in land values.
Government officials however have countered this argument by pointing to National Bureau of Statistic's figures that show, on average, land prices only accounted for 23.2% of the total price of property.
A representative of the real estate sector has since publicly expressed doubt about these numbers. Zhu Zhongyi, the vice chairman of China Properties Association expressed two concerns with the statistic. Firstly, the data is based on land prices for projects that are worth much less than those currently on sale, secondly, the figure does not include land tax, which should be included as part of the price of land.
As the debate goes on, EO takes a look at just what exactly is influencing property prices.
The Influence of Big-name Projects
One of the factors that has pushed Beijing prices higher has been the presence of big-name projects that drive up the prices of nearby properties. Beijing's CBD is particularly susceptible to this phenomenon and has witnessed sharp rises and falls in property prices over the past 12 months.
When the Beijing government auctioned off a block of land at 15 Guangqu Street in the city's Chaoyang district, Zhang Yan remembers how, what came to be referred to by the media as the "King of the Land", drove up the price of properties in the surrounding area. Zhang recalled that two days before the record auction, many property owners in the nearby American Rock or Houxiandai Cheng residential complex decided to take their properties off the market.
As expected, the average price for second-hand properties in the complex had shot up by 1,500 yuan per sqm the following day.
Zhang, a property broker with I Love My Home (Wo Ai Wo Jia), a well-known second-hand housing agent in Beijing, revealed that the average price of second-hand apartments in the American Rock complex was 10,000 yuan per sqm at the beginning of this year, but that it's now surged to no less than 16,000 yuan per sqm.
Another example is the nearby Shoucheng International Center. In November 2008, the starting price for the first phase of the development was 10,800 yuan per sqm, even lower than that of many of the second-hand apartments available in the area. However, by April and May of this year, the average sale price of Shoucheng's second phase units clocked in at 14,500 yuan per sqm. It's rumored that the price of the next phase of the project could reach 18,000 yuan per sqm.
What makes the Shoucheng International project so interesting is that it too was once known as "King of the Land". At that time, it was similarly referred to by its address at 36 Guangqumen, also in Beijing's Chaoyang district. What differentiates it from other developments, is the fact that the Beijing government had attempted to purposely lower the price of the apartments in the complex.
When the developer bought the land from the Beijing government at the end of 2006, they paid the equivalent of only 5,648 yuan per sqm. The total price was 400 million yuan less than the highest bid, but the government was willing to accept the deal because the developer promised to limit the price of the completed apartments to no more than 9,500 yuan per sqm.
At that time, the government wanted to rein in rocketing house prices. Statistics released by the National Development and Reform Commission (NDRC) in 2006 revealed that housing prices in 70 large and middle-sized cities had increased by 5.4%, compared with a year earlier, while Beijing was leading the trend with prices jumping by 10.7%.
Though the developers of Shoucheng International ended up breaking their promise, selling units at 12,000 yuan per sqm, government intervention in the pricing of the project still played an important role in bringing down the price of housing in the surrounding area.
Land SupplyThe other main factor affecting Beijing's housing prices is land supply.
When the market dived late last year, the local Beijing government was hit by a large and rapid drop off in real estate-related revenue.
In an attempt to invigorate the property market, the government adopted certain measures like relaxing the deadline for land transfer payments that together with the loose credit environment that emerged in the wake of China's stimulus package, helped to revive the flailing sector.
In the middle of July, the State Council held meetings to discuss the state of Beijing's property market. In these meetings, a representative from the real estate sector argued that it was the lack of an adequate supply of land at the start of the year that was responsible for the big-name "King of the Land" developments pushing up housing prices.
He revealed that from January to May this year, government land sales amounted to only 11.1 billion yuan, whereas in June alone they topped 10.2 billion yuan.
This claim was also backed by government figures that show in the first quarter, only 338 hectares of land went on sale, a drop of 48% on a year earlier.
Deciding on the rate at which land should be sold is one of the major policy decisions that local governments have to deal with. The fact that since 2005, Beijing has been unable to keep to its annual land supply plan suggests that governments are having to constantly fine-tune their land supply policies.
In 2005, the Beijing government planned to set aside 1,750 hectares of land for residential housing, but by the end of the year it had only made available 40% of that amount.
In 2006, the plan was to develop 1,600 hectares of residential land and 300 hectares of commercial property, but in the end only 56% of this land was released. In 2007, the plan itself was not released until September.
According to official data, during the second quarter, Beijing doubled the amount of land made available in the first quarter. In the past six months, it has made 730 hectares of land available for commercial use, three times more than that released in the same period during 2008.
This year, the Beijing government has set a target of ensuring that land sale revenues are equal to the 2008 total.
It plans to increase land set aside for development to 4,700 hectares this year, up 705 hectares on the 2008 figure and expects to complete development of 435 projects covering a total of 3,600 hectares.
The Role of Local Government
The history of the plot of land located at 15 Guanqu Street provides an interesting glimpse into the way the Beijing government uses land supply as a lever to control both housing prices and also its own revenues.
In 2004, the 420,000 sqm plot of land was auctioned for 1.82 billion yuan, the equivalent of 4,300 yuan per sqm. However, the deal soon fell through as the developer was unable to close the deal in time.
At the end of 2007, a second attempt to auction the land was unsuccessful due to there being less than 3 parties interested in bidding for the plot.
In June 2009, though the area had been "slimmed down" to 280,000 sqm, about two thirds the size of the original plot, it managed to fetch a price three times as high as the 2004 bid.
Over the intervening five years, nearby property values had doubled.
Some developers have questioned why the government chose to sell the plot at a time when Beijing's property market had already recovered, instead of re-offering it at a lower price immediately after the first failed auction.
When EO put this question to an official with the Beijing Municipal Bureau of Land and Resources, he replied, the government decides when to go ahead with a land sale according to the current state of the market.
"The government needs billions of yuan to cover the various costs involved in developing a plot of land, from demolishing old buildings, to arranging alternate accommodation and compensation for the original residents and even installing essential infrastructure. Aside from this, land sales also account for a large chunk of government revenue and therefore must not be treated lightly" he said.
In 2008, revenue raised for the Beijing government by land sales amounted to 50.3 billion yuan, accounting for 27% of the government's total revenue. For some local governments, property-related revenue accounts for close to half of their total revenue.
However, the government once again finds itself stuck in a dilemma, on the one hand ordinary working people find it difficult to afford property and call on the government to help reduce prices, on the other it is relying on land sales for a large amount of revenue and therefore has an interest in keeping prices high.
As Huang Xiaohu, the vice chairman of China Land Association, wrote in a recent article: the government plays a complex and contradictory role in the property market. On the one hand, they are responsible for providing housing for ordinary people; on the other hand, they rely on land sales for revenue; when housing prices fall, they will get less income. Facing such a dilemma, governments will inevitably tend to favour inflated property markets, so as to ensure their revenue.