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China Property

Beijing developers fear 80,000 yuan per sq m is the unofficial red line not to be crossed

Two and a half years after buying prime plot of land, developers finally granted presale permit at 79,458.99 yuan per square metre

PUBLISHED : Tuesday, 13 June, 2017, 5:00pm
UPDATED : Tuesday, 13 June, 2017, 7:53pm

Residential property developers in Beijing now believe that an unofficial price ceiling seems to have been set by city officials on new projects – at 80,000 yuan (US$11,774) per square metre.

The capital’s latest project, China Seal, just outside the southern second ring road, will be released for sale on Thursday after being granted a presale permit, at 79,458.99 yuan per square metre.

But according to industry sources, of all the new projects granted sale permits this year, not a single one has been granted a licence to sell above 80,000 yuan per square metre.

Several industry insiders interviewed by the South China Morning Post said the government did not have any formal documents specifying the ceiling, but developers were now beginning to accept, grudgingly, that 80,000 yuan per square metre was considered a red line that could not be officially crossed.

According to Chinese media, the developers of China Seal consulted with the Beijing housing authorities back in October, proposing an average presale price of 90,000 yuan per square metre, but that was turned down.

The plot was acquired by China Merchants Shekou Industrial Zone Holdings, China Resources Land, Wharf (Holdings) and Ping An Real Estate in January 2015 at nearly 50,000 yuan per square metre and should have been opened for sale last year. Existing homes nearby are currently selling at 66,000 yuan per square metre.

However, the unprecedented property curbs in place since then appear to have smashed the developers’ hope of making what is the accepted industry standard of a 20 to 25 per cent profit by selling at below that ceiling.

The complex covers 17 buildings, four of which are four-storey, 256 sq metre townhouses, which are not being opened for sale yet.

In what is seen as a clear sign of the developers’ bid to sell as few units as possible at that price level, only 192 undecorated homes covering 29,100 sq metres in the high-rise buildings are being offered. The firms previously suggested all the units would be sold decorated.

“The developers’ dilemma is that if they sell now, they have to accept the low prices set by the government. But if they don’t sell now, they can’t recoup their investment quickly enough and risk fierce competition when the cap is eased,” said Guo Yi, chief marketing officer of Beijing-based Yahao Consulting, adding that the cap meant developers would be tempted to compromise on quality.

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A visit to the China Seal site showed most of the buildings were nearly completed but the sales reception centre remained closed.

Two HomeLink agents at the site, however, said many of the units were being sold privately, through what one called “insider ties”.

“All the homes have been sold out in advance to people with insider ties. They don’t even have to open the reception centre,” said Zhang Songtao, one of the agents.

The four developers also have an adjacent development, Kunlunyu, which has been waiting for a presale permit since January 2015.

Chinese media reports said the authorities had rejected two presale permit applications by the developers for the units at the project to be sold at 110,000 yuan and 100,000 yuan per square metre respectively.

Kunlunyu’s units are smaller than those at China Seal.

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