After an 18 month climb, rents at Beijing’s expatriate homes are settling down. Foreign direct investment (FDI) in China rose by 13.4% from a year earlier amounting to USD9.2billion. A much slower rate compared to April’s 15.2% and March’s 32.9% rate. Tightened investment curbs and four interest rate hikes attributed to a cooling of the fast paced economy (source: Washington Post 15 June 2011).
Multinational presence in Beijing has matured and localization is a focus. For example, one major automotive firm is scheduled to localize its entire IT function. Waiting lists at the major international schools are always a good indicator of expatriate numbers. At Lihong we’ve noticed several last minute acceptances at major international schools. This contrasts with last year’s disappointments.
There has been no new supply of viable expatriate housing yet, with a few exceptions, rents remain stable (see below). This is significant as we’re in the midst of the summer family relocation season. Most expatriates moving into a villa community this summer have already signed their lease.
One exception is Beijing’s most exclusive apartment building, Embassy House. Occupancy is tremendous and rents continue to rise (see below). Lanson Place, its closest competitor in the luxury segment has similar occupancy levels. New luxury developments are coming to completion like Xanadu opposite CCTV Tower, but its a strata property and will not match the serviced apartments in maintenance or services. Although in the CBD, it’s at a busy intersection outside the 3rd Ring, with no amenities within walking distance.
As expected, younger expatriates have flocked to Sanlitun SOHO. There are a few unleased units, mostly owned by landlords with high rent expectations. The development’s Sanlitun location and minimalist interiors are strong attributes, but all SOHO China’s developments have superb occupancies in their first lease year. We hope Sanlitun SOHO retains its gloss, and does not deteriorate rapidly over time like many other SOHO developments.
In the CBD, steady demand for some layouts at ever popular Central Park has pushed rents up. Being a stroll to the office for many, and with no competitors in sight, we expect Central Park rents to remain strong.
At Park Avenue, another popular mid-tier development, rents are stable. Early this year Park Avenue’s gym closed suddenly. Members were not give refunds but told they could use the gym at Upper East Side, a 20 minute drive up the 4th Ring road. Needless to say, both tenants and landlords were disappointed. Many had availed of discounts for long term memberships that were sold up to the sudden closure. The gym has re-opened under different management with higher membership rates.
At MOMA, a large development is being built on its North side, where the larger apartment layouts are. We expect noise and dust levels to be high for at least 1 year. MOMA has attracted many French families due to the simple interiors, pleasant gardens and its proximity to the French School in Sanlitun.
In Shunyi, at Riviera occupancy is high but rent levels are unchanged. At Yosemite, rents have climbed (2-6%) over the last 6 months, increases were highest at the smaller townhouses. Being across the road from ISB and walking distance to the British School allows for premium rents. At Rits Garden, we’re seeing deterioration with little interest amongst expats despite being walking distance to popular Dulwich College. Rose and Gingko hasn’t garnered the interest we had expected perhaps due to the darker rooms typical of this Spanish colonial style.
Although rents remain strong due to no new supply of viable expat housing, they aren’t accelerating. Expatriates renewing leases signed 2 to 3 years ago may face a rent hike. Those renewing leases signed last summer will have less to worry about. As they head for their summer holidays, most expatriates will breath a sigh of relief as the market is cooling down.
Median Residential Rents *
Embassy House (City High-End)
- Apartment 2bed 213sqm RMB43,000/mth[6month Increase 13.2% - RMB38,000/mth]
- Apartment 3bed 314sqm RMB60,000/mth[6month Increase 9.1% - RMB55,000/mth]
Park Avenue (City Mid-Tier)
- Apartment 1bed 97sqm RMB10,000/mth[6month Increase 5.3% - RMB9,500/mth]
- Apartment 2bed 150sqm RMB16,000/mth [6month Increase 0% - RMB16,000/mth]
- Apartment 3bed 178sqm RMB22,000/mth [6month Increase 0% - RMB22,000/mth]
Central Park 3-4 Phase (City Mid-Tier)
- Apartment 1bed 88sqm RMB10,500/mth[6month Increase 5% - RMB10,000/mth]
- Apartment 2bed 139sqm RMB18,000/mth [6month Increase 0% - RMB18,000/mth]
- Apartment 3bed 188sqm RMB25,000/mth [6month Increase 4.2% - RMB24,000/mth]
Yosemite C-type (Suburban House)
- House 3bed 356sqm RMB38,000/mth(Townhouse 4bed) [6month Increase 5.6% - RMB36,000/mth]
- House 4bed 425sqm RMB47,000/mth(Semi-D 4+1bed) [6month Increase 2.2% - RMB46,000/mth]
Beijing Riviera - Upgraded (Suburban House)
- House 3+1bed 250sqm RMB35,000/mth (Type C 4bed) [6month Increase 0% - RMB35,000/mth]
- House 4+1bed 406sqm RMB45,000/mth (Type B 4bed) [6month Increase 0% - RMB45,000/mth]
* Note that these are median rents of a representative sample at each development. Actual rents vary up or down depending on specific unit and specific rent terms.
Released: 15 June 2011