Beijing relaxes caps on home prices partially as unsold flats in the capital city rise

Beijing, where property curbs are most stringent amid the central government’s drive to cool overheating in the sector, has put on sale another two land sites without a cap on selling prices in a policy shift that began late last year to generate demand for flats in the market slump.

The two plots in the capital city’s northeastern part of prime Chaoyang district were offered by the planning authority last week at starting prices of 2.45 billion yuan (US$362 million) and 2.39 billion yuan. A third site, put on offer since last October, has yet to be sold.

Unlike previous sales over the past two years, the government did not dictate the prices for flats that will be developed on the three land lots.

The policy shift came as efforts to lock in future selling prices to achieve a “stabilised outlook” by building units whose price is fixed in advance proved to be a hard sell, even if prices were lowered, and dampened developers’ appetite for land sites, said analysts.

Of the 24,893 such flats put on sale last year, only 4,530 of them, or 18 per cent, were sold by the year’s end, according to Ke Institute, research unit of property agent Lianjia. Eight land plots out of 52, failed to be sold, the highest number for Beijing city in five years.

“The latest [Chaoyang] sale sent a clear policy signal that the government wants to stimulate developers’ interest,” said Yan Yuejin, research director of the E-house China R&D Institute.

“Amid weak property sales and cash flow stress, not many developers dare to take the risk of acquiring a plot with a fixed selling price.”