Real estate prices may rise after merger of less well-off districts
The real estate market in Beijing has been in the doldrums since April, when the most stringent economic policy in a decade, brought in to cool the overheated realty sector, was announced.
Now, some realty salespeople and agents hope the consolidation of four districts in the core area of the city, announced on Thursday, will change the sluggish situation, especially in the two southern districts of Chongwen and Xuanwu.
Real estate experts, however, caution that any positive impact from the consolidation may not be seen in the short term and will likely only have an impact in the long run.
Zhao Han, a senior real estate agent with the Homelink Real Estate Agency Company, told METRO his business showed signs of recovery after the consolidation was announced.
He works in the Niujie branch of the company, located in Xuanwu district.
"We brokered only six successful deals (of secondhand housing) in the Niujie community in June," he said. "But we have already made three deals during the first four days of July."
Statistics provided by the Centaline Group, a real estate agency, show that clients looking for secondhand houses and apartments in Chongwen and Xuanwu grew by 20 percent during the first weekend of July.
Chongwen and Xuanwu, which will soon be merged into Dongcheng and Xicheng districts respectively, are traditionally regarded as less-developed and poorer areas of the city when compared to neighboring districts in the north.
A traditional saying popular among old Beijing residents says "Dongcheng is noble, Xicheng is affluent, Chongwen is poor, Xuanwu is dilapidated".
Fettered by poorer infrastructure and living conditions, realty prices in Chongwen and Xuanwu have been considerably lower than those in the two northern districts. Last month, average secondhand housing was selling for 29,500 yuan per square meter in Xicheng district, 28,400 in Dongcheng, 25,300 in Chongwen and 24,600 in Xuanwu.
Zhao said development in southern Beijing could be helped by the consolidation, which might stimulate housing transactions.
"It can help the housing market here and I think housing prices are going to rise," he said.
Some realty agencies have already raised housing prices and rents after the announcement of consolidation.
The Xuanwu branch of Centaline Group lifted monthly rents by between 50 and 600 Yuan, and housing prices went up by around 1,000 per square meter on Friday.
Not everyone, however, was so optimistic about the prospect of housing prices rising significantly in the two districts.
Zhonghai Ziyu Gongguan, located in Chongwen district, is a new compound of high-end apartment buildings. Zhang, its sales manager, told METRO that the district consolidation would not directly influence housing prices in Xuanwu district, including those at his project.
"Only changing a name will not make any difference", he said.
In the long run, however, things might be different.
Zhang said if the government of the new Xicheng district invests more resources into the current Xuanwu district, it would upgrade the infrastructure and promote the quality of life there. Then, housing prices might surge.
His view echoes that of Dong Fan, a real estate researcher with Beijing Normal University. Dong said the consolidation will not immediately affect the cost of housing in Chongwen and Xuanwu. Macro-economic factors and State policies play more significant roles in determining prices.
"But it may change in the long run," he said. Families living in Chongwen and Xuanwu could benefit because their children may be enrolled in better kindergartens and schools. Schooling is usually an important factor in determining house prices.
The revenues of Xicheng (15.2 billion yuan in 2009) and Dongcheng (7.1 billion yuan) are much higher than those of Xuanwu (2.8 billion yuan) and Chongwen (2.1 billion yuan). Dong thinks when the consolidation is complete, the new district government may invest more public money than before in the southern areas, boosting infrastructure in the current Xuanwu and Chongwen districts. Dong said the investment would have a positive effect on the housing market there.
