Beijing's housing market has firm foundations ? just don?t expect to speculate to accumulate Drawn like bees to a bauhinia, where there is property, there will usually be speculators. Yet as Beijing's housing market has burgeoned, there has been little of the same frenzy of short-term buying and selling as is being seen elsewhere in the country. This is due mainly to the government's determination to stop the economy from overheating, which has resulted in a recent clampdown on credit and a tightening of land transfer procedures. The thinking behind much of this is aimed not so much at stopping people from purchasing property, but at preventing families getting out of their depth when borrowing money and effectively speculating with the banks' cash. October's interest rate rise ? the People's Bank of China raised the benchmark rate for the first time in nine years to 5.58 per cent from 5.31 per cent ? was expected to reduce lending for mortgages but a massive slowdown was not anticipated. Loan amounts were also capped recently in Beijing. A maximum of five million yuan (HK$4.7 million) now applies for a single individual. Previously a five million yuan mortgage applied for each transaction. The government's policies are expected to effectively reduce speculative activity but not massively affect home-buying for those wanting to live in their purchases. Dick Kwan, managing director for China of ING Real Estate, believes the government?s action will not play as great a role in Beijing's property market where quality, rather than the kind of red-hot speculation seen in Shanghai, remains the defining factor. 'In Shanghai you see real speculation, people queuing up,' says Kwan. 'As a developer ourselves, we still see a good market for good properties in good locations. All the good products on offer are getting a good response ? our own project, Richmond Park, is doing well. 'Some properties don?t have such a good result, but often you find there are problems with the product.? Mr Kwan is frank in saying that he 'wouldn?t necessarily advise anyone' to buy for a pure investment. 'It?s a stable market, but you don?t get a quick turnaround on your money and there could be better property investments elsewhere.' Economist Arthur Kroeber, editor of the China Economic Quarterly, says it is really a tale of two cities. 'The dynamic in Beijing is different,' he says. 'In Shanghai you have an enormous amount of demand from abroad, basically from overseas Chinese, as well as from other cities in China. In Beijing, you have a little bit of demand from outside entrepreneurs, but nowhere near the kind of intensity in price increases that you get in Shanghai.' A look at the country's real estate index for the third quarter of this year bears this out. The national average in price rises was 9.9 per cent, but in Beijing property prices went up just 3.5 per cent, compared to a runaway 14.9 per cent in Shanghai. Another reason for this is, quite simply, that developers tend to toe the line better in the capital, where they are right under the noses of the central government. Mr Kwan reckons that while Beijing is a less spectacular market than Shanghai, it's also a more solid proposition. 'The property market in Beijing is quite stable. I don?t see a lot of speculation here and the secondary market is underdeveloped. Local developers don?t encourage speculation; it?s not like Shanghai. It?s not as sophisticated as Hong Kong and some things like having a name changed on a deed are difficult. It?s a market for people buying to live in their home ? there are investment buyers, but they tend to be long-term.' In October, China's Real Estate Academy announced China?s 10 most expensive villas, which featured five in Beijing and two in Shanghai, while Wuhan, Guangzhou and Shenzhen all had one each. Somewhat predictably, the two mansions in Shanghai are the most expensive among the ten, with Sunville selling at 130 million yuan (HK$122 million) nearly 100 million yuan (HK$94 million) more than Beijing's most expensive, the Green Sea Manor. Lawrence Wood, chairman of the China Property Development Fund, which is building Richmond Park with ING, said his group was taking steps to ensure stable investment and deter speculation. 'We don?t want to encourage speculators so we?ve introduced measures like restricting the changing of names on the deeds. When you sign the initial agreement, you need to arrange a mortgage with the bank. Between the signing of the mortgage and moving in, you can't change the name. 'There is no second hand market before the property is complete. We control supply. If you price too high, the demand will disappear.'