Overheated property market in Beijing’s Tongzhou district is losing steam
The red-hot property market in Tongzhou, set to transform into the capital’s second administration centre, is losing steam as most home seekers can barely meet the government latest home purchase requirements in the eastern suburban district of Beijing.
The district government last month issued a slew of tough measures to cool the market after home prices in Tongzhou surged more than 50 per cent since early last year.
“The property market has been frozen after two rounds of cooling measures to rein in the overheated market. Now, the home purchase restrictions in Tongzhou are the harshest in the nation,” said Li Yanlai, a director at Midland China’s Beijing office.
Under the curbs, purchasers who already have a flat and do not have a household registration, or hukou, in Tongzhou will be prohibited from buying a second home there while only corporate buyers will be able to purchase units at commercial-residential projects. Prior to the cooling measures, people in Beijing were allowed to buy second flats in Tongzhou and commercial-residential units were open to individual buyers. Units built on commercial-residential sites only have a 50-year lease compared with 70 years for purely residential sites.
In 2015, Beijing provided more details about its plan to relocate its municipal government and parliamentary and political advisory bodies to Tongzhou by 2017. The plan unintentionally sparked a “gold rush” mentality among investors who saw it as an opportunity to make quick gains by buying properties that were bound to rise in value.
“Before the curbs, investors from Beijing were on a treature hunt in the Tongzhou property market and drove up home prices to a levels never seen before,” Li said.
The unprecedented rise stoked fears of a property bubble as home prices soared beyond the reach of the general public, said Li.
Transaction volumes for new home sales immediately plunged more than 30 per cent after the curbs but there has been no big drop in home prices, she added.
Home prices in the Tongzhou secondary market saw a year on year 47.74 per cent growth to an average of 32,140 yuan per square metre in May, according to Midland China data.
For the first five months of the year 3,530 new flats were sold for an average price of 26,501 yuan per square metre, it said.
But Li said most new projects in good locations are pitched at 40,000 to 50,000 yuan per square metre.
“This price [40,000 yuan per sq m] could only buy very old units in Beijing city’s fourth ring and those new flats in a good location [in Beijing] are even more costly at about 70,000 to 100,000 yuan per square metre,” she said.
The influx of prospective buyers is due to the overall improvement in the district’s infrastructure. Beijing Metro Line 7, which currently ends at Jiaohuachang Station in the east, will be extended to Tongzhou, enhancing the area’s accessibility.
Besides the government departments, top hospitals and major universities, including Renmin University of China, will also move to Tongzhou. The district’s tourism industry will also receive a huge boost once the 2 million square metre Universal Studios, the world’s largest in terms of area, is completed in 2019.
The South China Morning Post visited a new residential project, Regal Park, located close to the area where most government organisations will be located in 2017, and near the Renmin University which is slated for opening in 2019.
“Have you checked if you meet the home purchase restriction?” asked the agent at the sales office. “We only have six apartments left unsold at the phase one development.”
One of the six available units for sale was a 134 square metre flat on the 10th floor, going for 6.51 million yuan. The price came down to 6.33 million yuan after factoring in a 2.8 per cent discount, as the sales agent tapped on a calculator and insisted it was the final price.
As the flat would be ready in August, buyers were required to put down nearly 4.26 million yuan, or 70 per cent of the total price, as the down payment.
“You can’t get this price for such a good location and high quality. In fact, there isn’t much stock of new flats in the nearby area as most projects were nearly sold out before the curbs,” said the agent.
Sherman Lai Ming-kai, chairman of Centaline Group, however, believes home prices in Tongzhou have already factored in the future development of the area.
“Home buyers need to take a long term view as the area is not fully developed yet,” he said.
In addition, most buyers skirt around the restrictions by buying flats under the name of their relatives who live in Tongzhou. “It is quite common on the mainland,” Lai said.
A sentence in paragraph 5 was amended to say that in 2015 Beijing gave more details about its government relocation plan.