Beijing's luxury home rental market looks positive for the next three years, thanks to more expatriates moving to the city and the 2008 Olympic Games, according to a report released yesterday.

 

This rental market covers hotel-serviced apartments, as well as high-end apartments and villas, mainly targeting foreigners and Chinese people working for large multinational companies.

 

Anna Kalifa from international property consulting house Jones Lang LaSalle, which wrote the report, predicted that demand for luxury residential rental housing in Beijing will rise over the coming years.

 

"More multinationals seek set-ups and expansions in Beijing, the capital of the world's fastest-growing economy, and the 2008 Olympic Games offers more opportunities," said Kalifa, Jones Lang LaSalle's head of research in Beijing.

 

The biggest impact the 2008 Olympic Games is expected to bring is improving the infrastructure and environment.

 

Beijing is becoming a cleaner and more sophisticated city as a result of the event.

 

"Considering the massive infrastructure projects coming to the city, notably the series of new metro lines, airport light rail and expressway, the long term outlook for the city is incredibly positive," said Kalifa.

 

Last year, there were more than 7,500 luxury units delivered to the luxury residential market, while the figure is expected to be 4,000-plus this year and 3,200 in 2007.

 

Though the number of units has decreased, the quality of the housing will improve and the property value will increase in the next two years, according to the report.

 

Chaoyang Park, located at the East Third Ring Road beside the city's Central Business District (CBD), and further east of the Chaoyang district will be the site of most of the luxury units.

 

Some projects are worth noting because the developer Beijing Premium Real Estate Ltd, a joint venture between Beijing Vantone and Hong Kong Land has a proven track record and the projects are of high quality in prime locations.

 

The projects include Park Avenue Phase III with 446 units, Central Park Phase III with 400 units and Yintai International Apartment with 240 units.

 

The report also forecasted that Sanlitun, a hub of foreign embassies, and Chaoyang Park will be hot for apartments, while the Shunyi area near Capital International Airport will be popular for villas.

 

However, the report predicts that, owing to the climbing rental demands, luxury residential landlords will face both challenges and opportunities.

 

"The investors should be aware that tenants have more and more options, especially in the high-end range, where rents will typically be about US$10 to US$14 per square meter per month," said Kalifa.

 

So far, investors are estimated to make up about 20 percent to 35 percent of luxury projects in Beijing.

 

While that number is high, the majority of these are long-term investors and many do not have intentions to lease out.

 

That said, the vacancy rate currently stands at about 27 percent for the luxury apartment sector, which will hover between 20 to 24 percent over the next three years.

 

Though the vacancy rate is high, the report said the rate will decrease by 2008 due to the Olympic Games.

 

Meanwhile, rents of luxury residential housing will remain more or less stagnant, with a marginal increase of about 1 percent per year expected between now and 2008, according to the report.

 

The market experienced a slight slowdown from last October to December.

 

The average rental fee in the sector fell by 1.6 percent, with the vacancy rate up by 2.0 percent.

 

The survey report pointed out that winter is typically the low season for the house rental market since it is a holiday season when less senior executives from multinational firms visit China.

 

Despite stagnation in rental growth, Kalifa forecasted that luxury residential real estate prices are expected to continue climbing between 5 to 10 percent per year during 2006 to 2008 given the strong demand, combined with rising land acquisition and construction costs.

 

(China Daily March 2, 2006)