Image: Wanliu Academy, Haidian district

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Briefing Residential sales April 2015

Savills World Research Beijing

Beijing’s first-hand residential market was relatively cool in the first quarter. Transaction volumes achieved around 1.5 million sq m, down 9.0% year-on-year (YoY), while supply plummeted 45% to 900,000 sq m during the same period. Meanwhile, price also registered a 3.7% YoY decline as developers continued to offer rental incentives to digest unsold inventory.

Two new Grade A apartments, coupled with one high-end villa project, entered the sales market, adding a total of 204 units and 29 units to the market respectively.

Grade A apartment transaction volumes fell approximately 50%

quarter-on-quarter (QoQ) to 378 units, while prices appreciated 0.4% QoQ to an average of RMB68,600 per sq m, up 9.2% YoY. The transactions were mainly contributed by the absorption of projects launched over the past 12 months.

High-end villa market transaction volumes fell to 196 units, almost half of that witnessed in the previous quarter. Prices fell around 5% to an average of RMB50,100 per sq m by the end of Q1/2015, still up 6.9% YoY.

Transaction volumes in the first-hand residential market are expected to continue to grow throughout the coming year, largely as a result of the relaxation

“A relaxation of policies by authorities is expected to lead to a growth in transaction volumes for the first-hand residential market in the coming year. Prices, however, are likely to remain stable as buyers continue to remain cautious.” Joan Wang, Savills Research

SUMMARYWhile an influx of supply during the next nine months will see a slow down in absorption rates, high net worth individuals are expected to support price appreciations in the high-end market.

of policies by the government. However, as purchasers continue to err on the side of caution, prices are expected to remain stable across the board.

02

Briefing | Beijing residential sales April 2015

PoliciesThe Beijing government continued

to implement policies to revive the

momentum of the slowing property

market in Q1/2015. The latest

moves saw authorities focus on

loosening credit and down payment

requirements for the sector, in

the hope of boosting transaction

volumes.

Significant policies of the quarter

included:

- The Ministry of Finance announced

that homeowners would be exempt

from capital gains tax after having

owned the property for a minimum

of two years. Previously, only homes

that were bought at least five years

ago were exempt from the tax.

- The People’s Bank of China

announced the minimum down

payment for first time home buyers

(units smaller than 90 sq m) using

public housing funds had been

reduced to 20% from the previous

30%.

- News from the Central Bank saw

down payments for second home

buyers applying for a mortgage

slashed from 60% to 40%.

First-hand mass-market overviewThe mass-residential market

was relatively cool in Q1/2015,

with declines in both supply and

transaction volumes. Supply levels

recorded 900,000 sq m during the

quarter, down 45% YoY. In the same

period, transaction volumes reached

around 1.5 million sq m, down 9.0%

YoY. While the government has been

active in implementing incentive

policies, the effects have not been

seen immediately, largely due to

GRAPH 1

First-hand mass-market residential supply, take-up and price index, Q1/2006–Q1/2015

Source: Beijing Real Estate Transaction and Management Bureau, Beijing Municipal Bureau of Statistics, Savills Research

GRAPH 2

First-hand Grade A apartment market supply, take-up and price, Q1/2006–Q1/2015

Source: Savills Research

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June 2005 = 100 milli

on s

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Supply (LHS) Absorption (LHS) Price index (RHS)

Figure 2 EN

Page 1

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RM

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Uni

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Supply (LHS) Absorption (LHS) Price (RHS)

Units

the traditionally slow season of the

period.

As unsold inventory levels reached

10.4 million sq m by the end of

Q1/2015, up 32% YoY, developers

continued to offer price discounts

to encourage sales. As a result,

prices registered a 3.7% YoY decline

by the end of March. Transaction

volumes in the first-hand residential

market are expected to continue to

grow throughout the coming year,

largely as a result of the relaxation of

policies by the government, therefore

prices are predicted to remain

relatively stable.

First-hand Grade A apartment marketTwo new projects entered the market

in Q1/2015, namely Wanliu Academy

(中赫万柳书院) and Ziyu Mansion (紫玉公馆), both located in Beijing’s

Briefing | Beijing residential sales

03

April 2015

western market, contributing an

additional 160 and 44 units of Grade

A apartments respectively.

Despite new supply this quarter,

Grade A apartment transaction

volumes fell approximately 50%

QoQ to 378 units. However, this is

only down 1.6% YoY and largely

a result of the traditionally slow

season marked by the Chinese New

Year period. However, supported

GRAPH 3

First-hand high-end villa market supply, take-up and price, Q1/2006–Q1/2015

Source: Savills Research

Figure 3 EN

Page 1

0

7,000

14,000

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28,000

35,000

42,000

49,000

56,000

63,000

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B per sq m

Uni

ts

Supply (LHS) Absorption (LHS) Price (RHS)

TABLE 1

New high-end apartments, Q1/2015

ProjectZiyu Mansion

(紫玉公馆)Wanliu Academy

(中赫万柳书院)

Location ZGC Wanliu

Developer Hairun Properties SINBO

Pre-sale date Jan 2015 Jan 2015

Pre-sale price(RMB per sq m)

70,000 145,000

Units 44 160

Source: Savills Research

by a steady demand from the

growing number of high net worth

individuals (HNWIs) in the capital

city, transaction prices appreciated

0.4% QoQ to an average of

RMB68,600, up 9.2% YoY.

First-hand high-end villa marketOne high-end villa, Wonderland

Mansion (燕西华府), launched its new phase in Q1/2015, offering 29

units. Despite the new supply, high-

end villa market transaction volumes

fell to 196 units, almost half of that

witnessed in the previous quarter.

However, demand for newer projects

remained strong, with Ocean Palace

(远洋天著) and newly-launched Wonderland Mansion (燕西华府) and Western Art Villa (西山艺境嘉园) recording active transactions.

Transaction prices fell around 5% to

an average of RMB50,100 per sq m

by the end of Q1/2015, up 6.9% YoY.

The remaining three quarters of 2015

is scheduled to see five new high-

end villas enter the sales market,

with the majority of projects posting

proposed prices over RMB100,000

per sq m. Steady demand from

HNWIs is expected to continue to

support price appreciations, however,

take-up is expected to slow as the

market struggles to digest the influx

of new supply.

Residential land marketBeijing land market transaction

volumes decreased 36% YoY

to RMB48.4 billion. Despite the

residential market being relatively

cool over the past year, strong

interest in land acquisition in the

capital city was seen this quarter

as Beijing continues to be one of

the most strategically important

markets. As a result, residential

land plots contributed nearly 60%

of total transaction volumes, with

notable deals including three land

plots located in the Fengtai district,

two of which were acquired through

joint acquisitions for a total price of

RMB17.3 billion.

Other news saw the Beijing City Land

Bureau announce the residential

land supply for the coming year will

Briefing | Beijing residential sales

04

April 2015

Plot District Planned GFA (sq m)Consideration (RMB billion) Usage

Accommodation value (RMB per sq m) Buyer

West Yalin plot Feingtai 178,615 4.2 Residential zoned plot 28,000China Merchants&China Resource&

Ping’an Real Estate

West Yalin plot Feingtai 159,559 4.5 Residential zoned plot 23,500China Merchants&China Resource&

Ping’an Real Estate

Huaxiang Baipenyao plot Fengtai 418,693 8.6

Residential zoned plot 20,600

Beijing Capital Development&

China Resource&Ping’an Real Estate

Source: Savills Research, Beijing Land Consolidation and Reserve Centre

TABLE 3

Major residential land transactions, Q1/2015

Project Wonderland Mansion (燕西华府)

Location Fengtai

Developer Yicheng Real Estate

Pre-sale date Feb. 2015 (new phase)

Pre-sale price(RMB per sq m)

33,000-48,000

Units 29

Source: Savills Research

TABLE 2

New high-end villas, Q1/2015be 25% less than that witnessed in

the previous year. This is expected

to prevent the market becoming

saturated and is likely to support the

stability of pricing for the coming

year.

Market outlookAlthough Transaction volumes in

the first-hand residential market

are expected to continue to grow

throughout the coming year, largely

as a result of the relaxation of

policies by the government. However,

as purchasers continue to err on the

side of caution, prices are expected

to remain largely stable across the

board. Residential land supply in

2015 will be 25% less than that

witnessed in the previous year,

preventing the market becoming

saturated, and is likely to support

the stability in pricing for the coming

year.

The high-end sector is expected to

see a significant injection of supply

to the market, as four new high-end

apartments combined with five new

high-end villas are scheduled to enter

the sales market in the remaining

three quarters of 2015. The majority

of projects are posting proposed

prices over RMB100,000 per sq m.

Despite steady demand expected

from HNWIs to support price

appreciations, absorption of new

projects is expected to slow due to

the influx of new supply in the next

nine months.

Meanwhile, new areas are expected

to accelerate to maturity with a

number of new high-end residences

scheduled for debut. Areas of

interest include the up-and-coming

Sunhe area, which is located in close

proximity to Beijing’s Central Villa

district. The Dongba area, located

in the Fourth Embassy area of

Beijing, also shows promise, as it is

expected to receive its first batch of

high-end residences in 2H/2015.

Briefing | Beijing residential sales

05

Please contact us for further information Savills Research Savills Residential Sales Savills Beijing Research

& Consultancy

Savills plcSavills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 600 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East.

This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.

James MacdonaldDirector, China+8621 6391 6688james.macdonald@savills.com.cn

Joan WangDirector+8610 5925 2042joan.wang@savills.com.cn

Anthony McQuadeSenior Director+8610 5925 2002anthony.mcquade@savills.com.cn

Angela LuAssociate Director+8610 5925 2068angela.lu@savills.com.cn

April 2015

TABLE 4

Future supply, 2015-2017E

No. Project (EN) Project (CN) Location Property Type Supply (units) Scheduledlaunch timeProposed price(RMB per sq m)

1 Central Park Plaza 骏豪•中央公园广场 Chaoyang Park Apartment 49 Q2/2015 100,000-150,000

2 Longfor Xichenyuanzhu 龙湖西宸原著 Fengtai Villa 109 Q2/2015 Above 100,000

3 Poly & BCDCLiwan Jiayuan保利首开•丽湾嘉园

(暂定名) Dongba Villa 116 2H/2015 Around 100,000

4 Evergrande Huafu 恒大华府(暂定名) Dongba Apartment TBC 2H/2015 Around 100,000

5 La Croyance 首开琅樾 Sunhe Villa 43 2H/2015 TBC

6 COFCO Rui Fu 中粮瑞府 Sunhe Villa TBC 2H/2015 Above 100,000

7 Kuntai Jiarui Centre Apartment 昆泰嘉瑞中心公寓 Wangjing Apartment TBC 2H/2015 TBC

8 Sino-ocean Liuniangfu Project 远洋刘娘府项目 Shijingshan Villa TBC 2H/2015 TBC

9 Sanlitun No.1 三里屯壹号 Sanlitun Apartment 48 2H/2015 100,000-150,000

10 Kaisa Plaza 佳兆业广场 CBD Apartment 273 2016 150,000

11 Maoyuan Xiajia Hutong Project 懋源夏家胡同项目 Fengtai Apartment TBC 2016 TBC

12 Thaihot Xiju Project 泰禾西局项目 Fengtai Apartment TBC 2016 TBC

11 Donghua Mansion 东华府(城启皇城根项目) North 2nd Ring Road Villa TBC 2016-2017 TBC

12 Xiangheyuan Plot No.3 香河园3号项目2nd Embassy

Area Apartment TBC 2016-2017 TBC

13 Wangfujing Haigangcheng 王府井海港城East Chang’an

Avenue Apartment TBC 2016-2017 TBC

Source: Savills Research