The city's key developer says a healthy economy will sustain home prices Beijing will see a steady growth in residential prices over the next two decades on the back of a robust economy and a rise in demand from local home-hunters and overseas investors, according to the city's key developer. Tang Jun, president and executive director of Beijing Capital Land, said average home prices increased 3 per cent to 8 per cent in the city last year as the demand for flats rose substantially. 'I believe the rising trend will continue for the next 10 to 20 years,' Mr Tang said. The city government estimates that home prices, spurred by economic growth, will continue to surge until 2020. 'The property peak is expected in 2012, when the economic impact of the 2008 Olympic Games will be felt,'' Mr Tang said, quoting the city authority forecast. Beijing saw significant economic expansion in the first half of the year, with gross domestic product up 9.6 per cent. Investors, about half of them private foreign and domestic entrepreneurs, are seen as being largely responsible for helping to prop up the city's economy. In the first half, they paid 71.4 billion yuan (HK$67.3 billion) for several projects, ranging from residential to light industrial development, a 15.2 per cent increase over the same period of last year. Strong economic growth had created a group of middle-income earners who were eager to possess apartments of their own and enjoy a better quality of life, Mr Tang said. He said there was no official figure on how big the middle class was, but pointed out that there were about 400,000 Beijing residents who earned more than 70,000 yuan in Zhongguancun (the city's hi-tech district) alone. This sector represented Beijing Capital Land's target group for middle and upper-range flats priced between 7,000 and 10,000 yuan per square metre (or 500,000 yuan to more than one million yuan per unit). Beijing Capital Land, with the backing of the Beijing municipal government, focuses on middle-range to high-end residential properties, office buildings and retail properties. It also invests in hotel operations in different parts of the capital. The company has a land bank covering about 2.9 million square metres. If fully developed, this land area could generate a gross floor area of 3.4 million square metres. The firm's prime residential projects include Sunny Scenic View, Jia Run Garden, Vancouver Garden and Sydney Coast. Mr Tang said the Beijing government had introduced measures to secure the secondary market by reducing the tax on the resale of flats. That would contribute to the health of the city's home market, he said. The secondary market accounted for only 3 per cent of all property transactions, Mr Tang said. Domestic buyers apart, overseas investors and multinationals have emerged as the main buying force in the Beijing residential market. This trend is supported by a surge in business travel. Close to 40 per cent of the company's residential projects have been sold over the past year to international firms (who required dormitories for staff), investors and overseas Chinese. The company plans to hold an exhibition in Hong Kong in November to showcase its residential projects, in a bid to attract overseas buyers. Commenting on measures announced by the People's Bank of China on real estate-related lending, Mr Tang said the new guidelines were likely to accelerate industry consolidation because the policies were detrimental to highly indebted small players. The central bank has asked banks to tighten lending to highly indebted real-estate firms in a move to regulate the industry. It has also asked banks to tighten mortgage lending on secondary residential units. Mr Tang said tightened lending to companies would help regulate the industry and force debt-burdened players out of the market. 'There are more than 4,000 property firms in Beijing, and most of them were established after 2000,' he said, adding that it was possible the new restrictions on lending could cut the number of firms by half.