Chairman Mao never saw this coming. Ranch-style bungalows abounding in Beijing's -western suburbs, duplex two-garage luxury homes near the -international airport, mock-Tudor palaces in the northwest, glass-walled visions of Manhattan just a short walk from the Forbidden City. Even for the most hardened of capitalists, it takes a bit of getting used to. Nevertheless, Beijing?s luxury housing market is a reality now and looks like a pretty good investment, if you do your homework, take your time and keep your eyes peeled for the right opportunity. Until recently foreigners were effectively restricted to the diplomatic compounds of the city. But the opening up of China and the economic boom of recent years has transformed the city and now foreigners and mainlanders alike are free to choose where they live. 'Since 1998, the government has been encouraging local people to buy their own houses and demand for ownership has been increasing,' says Caroline Moulin, research manager at Jones Lang LaSalle in Beijing. ?We expect this demand to continue to grow, as the middle-class represents about 15 per cent of the Beijing population and is expected to grow a percentage point a year over the next few years. 'Since the restrictions on foreign-approved housing have been abolished, foreigners can now lease and buy anywhere, which created more new demand and more new supply. Local developers have been building new modern projects with better quality and layout.' There are scores of Chinese and foreign developers at work in the city, building new apartments and houses at prices ranging from the affordable middle-class home to the expensive dream house. But not everyone is sure this supply is going to be taken up as quickly as the developers would like. State media have run commentaries fretting about the rapid increase in the number of villas being built in Beijing. Analysts have forecast that within the next two years, between 5,000 and 7,000 homes priced at five million yuan (HK$4.7 million) or more will be put on the market, with a total value of around 30 billion yuan (HK$28 billion). That is nearly two thirds of the current market total of about 45 billion yuan (HK$42 billion). But most experts are upbeat. 'I don?t see a lot of evidence of an unhealthy market from a financial standpoint. I don?t see a bubble,? says economist Arthur Kroeber, editor of the China Economic Quarterly. 'A bubble arises where people buy property using loan finance and then sell it down the road. You see that a bit in Shanghai but not in -Beijing. Here the speculation is more long-term.? Rita Seck, resident manager at Maple Place, part of the Beijing -Riviera development, says the market has cert ainly recovered from the post-Sars gloom. 'This has been a really good year, especially in July and August,' she says. Still, there is concern about a glut in the near term as developers rush to finish projects before the run-up to the 2008 Olympics. The Games are transforming the city?s landscape far more dramatically than Mao?s engineers ever could, and while there is scepticism among economists about how a three-week sporting event can boost demand for housing, the Games will definitely have an impact on supply. At the end of 2006, the city will ban all construction work on non-Olympic projects as it prepares to dust off its image - literally - in preparation for the Games. 'So you have an artificial limit on construction - they have to build now,' Mr Krober points out. Caroline Moulin says deregulation and the implementation of China?s World Trade Organisation commitments will help keep the market growing. 'In terms of supply, we foresee a large amount to come to the market over the next few years. This supply will mainly come from local developers, 80 per cent, and some from foreign developers, 20 per cent. New projects offer better layout, design, quality of building, more facilities and amenities and lower prices.' The government shares the broadly optimistic picture. A recent Ministry of Construction report said rising house prices were supported by matching demand and didn?t qualify as a property bubble. The report, 'How to Review Current Real Estate Market', forecast the average housing area per capita to rise to 35 square metres by 2020. Given that some experts predict China?s urban population could top 800 million by then, this would create huge potential demand. Says Mr Kroeber: 'In economic terms, they are building a lot, and you?ll probably have a glut of high-end housing. But demand will appear.'