China property firms sneak residential flats into big new financial centre planned in Beijing’s Tongzhou district
- Homebuyers rushed in to buy up flats in towers intended for commercial use before government tightened up vetting process
- Financial hotbed will have thousands of residences, many of them rented to commuters
As building work proceeds on a planned new financial centre in the Tongzhou district on the far eastern outskirts of Beijing, enterprising property firms have stepped in instead to turn some of the buildings into residential flats.
The local government has envisioned turning a 16 square kilometre area of land in Tongzhou into a home for local and multinational financial companies, close to another part of the district where the Beijing city government is moving its municipal administrative offices.
But so far the area, called the Canal Core Area, is functioning more as a bedroom community for thousands of commuters, highlighting a common mismatch on the mainland between the wishes of local governments to foster new industries and commercial hubs, and the country’s urgent need for housing.
“I have asked a lot of local officials why they are reluctant to build more homes. One major reason is more homes means more people inflow, and more inflow means bigger fiscal spending burden,” said Li Tie, chief economist with China Centre for Urban Development.
Tongzhou authorities have since tightened rules for companies wishing to build in the Canal Core Area, and no longer allow them to sell individual flats within buildings, only whole buildings.
Meanwhile, several big state banks, including Postal Savings Bank of China, have agreed to move some of their operations into the area. But it remains to be seen whether private domestic financial firms and multinational platers will come, analysts said.
Cushman & Wakefield, a global real estate services company, estimates that Canal Core Area could eventually have a total 2.3 million square metres of commercial floor space. Completion is set for around 2035.
For the time being, it is the commuter who is holding the upper hand in Tongzhou, which is only 17 kilometres from central Beijing with a direct subway line to the city. Demand for housing in the overall district is 2.6 times more than the available supply, according to Cushman &Wakefield.
Already, the average price of second-hand homes in the district has doubled in just three years to 42,576 yuan per square metre, providing an opportunity for buyers.
“For a long-term investor who has the eligibility to buy homes in Tongzhou, I would definitely suggest buying one,” said Chen Lei, an analyst with property listing firm Zhuge.com.
As for the buildings in the planned financial centre, many buyers are leasing them out to rental apartment operators such as Ziroom, which then refurbish and sublease them.
Chen Kui, an official at Ziroom, said it has leased about 60-70 units in two of the finished apartment buildings, and more than 70 per cent have been rented out.
A 65-square metre, one bedroom flat can fetch 5,060 yuan (US$733) per month, plus an 8 per cent service fee, underscoring the choiceness of the location, he said.
A 43-square-metre studio rents for 4,130 yuan, up from about 3,000 yuan a year ago.
However, he noted that there were scant amenities in the neighbourhood, with the nearest shopping centre about 3.4 kilometres away.
“Most of the tenants here are commuters. It is better to live here because the subway is easier to get on from this station,” he said.