Beijing Capital sees 5pc rise in expenses after rate move

Beijing Capital Land, the property development arm of the Beijing municipal government, expects its expenses to rise 5 per cent after the mainland raised interest rates.

On Saturday, the People's Bank of China raised the one-year lending rate to 6.39 per cent from 6.12 per cent and the one-year deposit rate to 2.79 per cent from 2.52 per cent. The increase, effective from Sunday, has made borrowings more costly.

Beijing Capital executive director Tang Jun said the interest rate rise would prompt consolidation in the market but would not have a big impact on prices.

He added the company might have acquisitions this year.

Mr Tang said the average price for a house in Beijing last year grew 9.6 per cent, lower than the economic growth of 10 per cent. 'This is a healthy growth rate,' he said.

Last Friday, Beijing Capital said net profit jumped 26 per cent to 266 million yuan last year while sales surged 80 per cent to 2.04 billion yuan.

At the end of last month, the company's land bank amounted to 5.55 million square metres, of which 42 per cent was in Beijing. It aims to expand its land bank to 10 million square metres by the end of next year.

The developer also hopes to have 50 per cent of its land bank in Beijing in three years, and the rest will be in cities such as Wuxi, Chengdu, Tianjin, Shenyang and Taiyuan.

Chief financial officer Luo Jun said Beijing Capital's gross profit would return to the 2005 level this year after falling 11 per cent to 245 million yuan last year because housing prices were lower than costs.

Shares in Beijing Capital fell 2.08 per cent to HK$2.82 yesterday.