Market softness reflects deadline for uncluttered skyline as Olympics loom Fears of a property bubble appear to be without foundation in the capital, as new construction is being snapped up by young Chinese buying their first flat, multinationals setting up shop, and a continuing flood of expatriates. Prices are steady for both office and residential space in Beijing and most of the sales are to long-term buyers, rather than speculators looking to make a quick killing. 'We haven't seen many overnight flippers among our customers,' said Zhang Xin, the co-chief executive of Soho China, a property developer that has built a highly popular series of housing complexes in downtown Beijing. 'I don't think they are buying for asset appreciation.' Michael Purefoy, the managing director of property agent FPD Savils in Beijing, said: 'While there is a phenomenal amount of new residential supply, there seems to be demand for it. I don't see any signs of overheating. If demand were to drop off, it would be a different story.' China's top leaders have targeted the property sector as a posterboard case of over-investment, saying that banks are lending too much money to inefficient projects that eventually could go bust. But while there have been delays construction of a few notable buildings, including the high-profile CCTV tower, there is little sign of a bubble forming in Beijing's overall property market. The price for prime office space in Beijing was unchanged in the first quarter at US$18.30 per square metre compared with the fourth quarter of last year, according to CB Richard Ellis. Luxury residential rentals fell 0.2 per cent to an average of $12.60 per square metre, while luxury sales fell 2.2 per cent to $1,519 per square metre. The vacancy rate for office space in the first quarter of this year was 13 per cent, the same as a year ago, according to property company Jones Lang LaSalle. The rate climbed to as high as 18 per cent early last year but has since levelled off. Prices for flats in the better areas of Beijing have declined over the past year. In the Embassy area, flats tracked by a pricing index kept by Jones Lang LaSalle have fallen to 79 in April this year from 93 a year earlier. The softness in the market is not a sign of the collapse of property values, but more likely reflects recent regulatory changes. Beijing has ordered all exterior construction on major developments to be completed by the end of 2006 to avoid cluttering up the city's skyline before the Olympics. Developers are racing to put up their projects before that deadline. That is beginning to show up in vacancy rates. The residential vacancy rate jumped significantly in the first quarter to 35 per cent from 23 per cent a year ago. But that increase in supply should be soaked up in a year or two by the bourgeoning demand. 'We expect an increase in supply in 2004 and 2005, as well as strong demand,' said Caroline Moulin, the head of research for Jones Lang LaSalle in Beijing. Beijing residents appear to have the money to land themselves expensive apartments and villas that many intend to occupy, flouting accusations of people buying empty flats sight unseen just to make a quick profit. 'Four people in my office are buying their first flat in one of the best complexes in the central business district,' said a lawyer for a British firm. 'They are moving from their parents' place to their own flat.' Yosemite, a luxurious villa complex with 80 units on the outskirts of Beijing, is now 90 per cent sold. The average unit is 350 square metres and sold for US$2,000 per square metre, mainly to mainland natives returning to China from overseas to work for multinational companies. 'More than 70 per cent are buying for themselves and only 30 per cent are buying as an investment,' said Wesley Wu, a sales manager. Central Park, a residential complex in Beijing's central business district backed by Hongkong Land, has sold most of its units for prices ranging from 13,000 yuan to 18,000 yuan per square metre, the company said. About 80 per cent are mainlanders, with the rest from Hong Kong and overseas. About 50 per cent intend to live there and the remainder are buying as an investment.