Beijing Residential Rentals - 12 month outlook

On the demand side, rents are dependent on foreign investment levels and the knock-on effect of increases in foreign staff. China does not yet appear to have been affected by shaky global sentiment. As for supply, we anticipate a drop in viable new residential developments coming on-line. In suburban Shunyi, where Beijing’s expatriate families live, it’s unlikely that opulentĀ  new developments, ready soon, will appeal to expatriates. Increases in supply will be from landlords renovating older houses. Although there’s an abundance of land in the district, recent developments have been for retail space or commercial projects like the new Beijing Exhibition Centre.

In prime Chaoyang neighbourhoods developers are moving up-scale, choosing to only build luxury properties. Chevalier at Sanyuan Qiao is a typical example. Expatriates seeking new 2 bedroom apartments with rent budgets below RMB15,000/month will need to look further afield as future mid-tier properties will be built to the East and South of the CBD. Despite the added distance, new subway lines will continue to allow an easy commute.

Although the Olympics raised expectations in the Spring amongst some mid-tier landlords, it was only for short-term August rentals. Rents for villa and luxury apartments have always been immune to the Olympic effect. For the coming 12 months we expect rents to remain stable at solid developments like Park Avenue, Central Park and Yosemite. However, with poor occupancy since launch, we anticipate drops in rents at developments less popular with expatriates such as Rits Garden, Cathay View and Orchid Garden.
We do expect a slight surge in replacements in summer 2009 due to corporations having postponed rotations for expatriate families in 2008 because of the games. Note that expatriates whose rent allowances are tied to the dollar may feel the pinch if RMB appreciations continue.

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