State of Beijing Property

Beijing’s property prices jumped 40% in 2001 when the city won the bid to hold the 29th Olympic Games. In the past 6 years, the compound growth rate has exceeded 50%! In 2006, Beijing’s property prices saw double-digit growth for seven months in a row, making it the hottest real estate market among all major Chinese cities.

This has naturally raised concerns about a potential real estate bubble, just like what has happened in US. Is the Olympics driving up the prices? Will the bubble burst after the Games? Should someone wait a little longer to buy a property? These are the questions Beijingers and investors are increasingly asking these days.

Some property investment experts opine that although the Olympics are fueling Beijing’s property market, it is not the primary factor. Some said the real driving force is the strong demand not only generated by Beijing residents themselves but also by others planning to settle down in the capital. Others think that only 10% of the property price rise can be attributed to the coming Olympics. Afterall, it’s only natural for real estate prices to rise if the economy grows. Recall that China's GDP has maintained a minimum 10% growth over the past four years, and Beijing's growth was 12% last year!

Certain experts think that the end of the Games won’t mean the end of this booming economy, so it’s unlikely that the property market will crash after the Games. "In fact, the boost that the city has received in terms of infrastructure, transportation and facilities will begin to show only after the Games", quoted Capitaland (China) Investment's General Manager Mao Daqing.

Nevertheless, in every optimist there is a pessimist. The pessimists believe that property price rise will slow down after the Games, some experts even forecast a drop afterward.
According to Beijing Statistics Bureau, investment in the city’s real estate sector totalled 171.9 billion yuan by the end of last year, up 12.8% year-on-year. But the growth rate dropped 28.3% compared with early 2006, and that of the residential sector fell from 86% early last year to 15.9% by the end of December. The average sales of property last year also dropped to a record eight-year low, a recent report from the economic research institute of National Development and Reform Commission showed. The report further states that they are expecting a sluggish property market after 2008 or 2009.

Whatever the opinion is, history tends to remind people that most things that go up too quickly will not be sustainable over time. Just remember the current US property market slump and the Hong Kong property market crash in the late 90s.