High bar set for new homes in Beijing is turning off buyers
In the week ending March 18, 131 homes were sold across Beijing, according to the latest official data, compared with 1,981 units the same period a year ago
To reach the main exhibition hall of Ten Scenes Palace, a new villa and town house complex on the outskirts of northern Beijing, you have to pass through three gates, being saluted on the way by smartly dressed receptionists in scarlet coats and black leggings.
Outside, the large Chinese-style courtyard is decorated with peach trees, while in the spacious hall itself there’s a model of the complex, with every visitor closely hounded by a sale representative.
After a long tour, visitors can enjoy free fruit and snacks in a bright and comfortable lounge.
But despite all this effort and attention to fine detail, just three families were at Ten Scenes Palace during this particular Sunday-morning viewing.
Launched by Tahoe Group in Changping on March 8, more than 40 kilometres north of downtown Beijing, agents refused to say how many units have been sold, insisting visitors should buy early, not to miss out. Prices are still high, though, despite the lack of interest.
The smallest homes in the complex’s high-rise building are 133-136 square metres, and at 55,000 yuan (US$8,670) per sq m they carry a total price tag of around 7.4 million yuan. The villas are 330 sq m.
Home purchase curbs imposed a year ago have made such homes even less out of reach for ordinary buyers.
Anyone with a mortgage history, no matter whether their outstanding has been paid off or not, is considered a second-time buyer and subject to a minimum 80 per cent down payment.
Most buyers of such high-end homes already own a home and are looking to climb the property ladder with a larger one.
“Even if they paid for their first home solely on their own, outright, then they are still eligible for a 40 per cent down payment, as a first-time buyer,” one sales agent points out.
Developers cannot help arrange a loan to pay for the minimum deposit, she adds. And there are no discounts on offer. Bridging loans were previously available to help buyers, but since the curbs fuelled spectacular price surges over the past two years, those two are now strictly off limits.
Such high-end new homes in Beijing have simply been priced out of reach for most would-be, new-home buyers, making the market largely now a mainstay of China’s lower-tier cities, and a rarity in the capital.
In the week ending March 11, 239 homes were sold across Beijing, according to the latest official data, compared with 1,491 units the same period a year ago, just before the curbs were imposed. And in the following seven days to March 18, Beijing sales dropped to just 131 homes, compared with 1,981 units the year earlier.
A resounding 83 per cent of sales in Beijing last year were pre-owned home transactions. And more than 90 per cent of the new homes available are outside the city’s Fifth Ring Road, according to Centaline Property Agency.
“Beijing’s new homes market is increasingly confined to a wealthy few buying big, luxury homes in faraway suburbs. The second-hand homes market is more geared for the mainstream,” said Guo Yi, market director at Yahao, a real estate consulting agency in Beijing.
Developers say they are being forced to go “high-end”, because if they build mass-market products on plots bought at high prices, profits will be too thin.
Rising mortgage rates have also hampered buying. A year ago, most banks in Beijing offered 10 per cent discounts for first-time buyers, but are now asking for a 10 per cent premium over the benchmark interest rate.
Sales data for the latest batch of 40 homes released for sale at Ten Scenes Palace is not available, but the government-registered sale from the adjacent Tahoe project – which started pre-sales last July – offer a strong clue on the market’s direction.
Of the 389 town houses and 408 villas to go on sale there so far, 179 town houses and 264 villas have sold. That is in sharp contrast with a year ago, when all available new homes were snaffled soon after sales opened.
Other newly launched projects are facing similarly slow traffic. Not far from Tahoe, another project reports 182 units sold, out of 414 put on sale in November.