A taste for the high life

THE GROWING AFFLUENCE of mainland people is nurturing a taste for everything luxurious and a prime address tops the list as a must-have symbol of having arrived.

When a high-end residential project in a major city goes on sale there are more high net-worth buyers who are local residents from the city or from other parts of China than cash-rich foreigners.

Among the buyers of luxury homes in Beijing, generally half of them are Beijingers and a quarter are mainlanders from other cities. Shanghai is about the same. Foreign investors make up only 20 to 50 per cent of all buyers, depending on the project. In Guangzhou, foreign buyers are even fewer, at just 10 to 20 per cent, CBRE Research director Margaret Ng says.

As the central government resorts to limiting foreign ownership of real estate as one of the measures to rein in runaway property prices, the number of overseas buyers is likely to decline further. If strictly implemented, only foreign companies registered on the mainland or foreigners who have lived on the mainland for more than a year are qualified to invest in mainland properties.

Ms Wong doubts that this will be effective in restraining price escalation. In fact, she thinks the reverse may happen. 'In the long term, limiting foreign ownership will only fuel further price growth,' she says.

Statistics on prices and transaction volume of the period immediately after the introduction of the cooling measures indicate that the measures have had little dampening effect at the top-end of the residential market in Beijing and Guangzhou.

Beijing deluxe apartments are 10 per cent more expensive than the same time last year and villas cost 2.6 per cent more. Tenants have to pay higher rents in the second quarter too - 4.3 per cent more for apartments and 3.9 per cent more for villas compared with the quarter before, according to Ms Ng.