Rents on luxury residential housing in Beijing are too high and could fall
as much as 60 per cent, according to Pan Shiyi. Chairman of Beijing-based developer
Soho China.
Pan said in Hong Kong yesterday that luxury housing rents were more than double the mortgage instalments paid by owners.
As an example, he cited a high-end property belonging to Yan Yan, chief operating officer of Soho China, saying the profit return on her house was almost three times the mortgage instalment.
Yan bought the house in 1999 on a 10-year mortgage. She was now renting it our for US$5,000(HS$39,000) a month more than enough to cover her instalments of 13,500 Yuan (HS$12,721).
"As I bought it a long time ago. The property price now has risen," Yan said "This is a good investment."
Pan said property rents in the capital could fall between 50 and 60 percent. However, he said the Beijing residential market was healthy.
"For the past three years, property prices in Beijing have risen steadily Most buyers purchase homes to live in there are only a few investors so I do not think any bubble has developed in the Beijing property market."
But he echoed Premier Zhu Rongji's earlier view that a bubble was developing in some mainland cities.
Pan also said prices for Beijing properties in good locations and of good quality still had room to increase because purchasing power was on the rise with Beijing dropping the restriction on foreigners buying properties in the city.
"Although foreigners. Including people from Hong Kong and Taiwan, and mainlanders living outside Beijing, are allowed to buy Beijing properties now. They still have to go through complicated procedures.
"As I understand, relevant authorities will cut down the procedures in one or two months, thus purchasing power will increase and prices for Beijing properties will increase," he said.
Pan said his company's turnover was 2.73 billion Yuan (HS$2.57 billion) last year including 2.4 billion Yuan coming from Jian Wai Soho, its hottest property project in Beijing.
"So far this year, turnover has reached almost 200 million Yuan," he said.
This year's turnover would exceed last year's, he said, without giving the growth rate. He also warned that real estate developers would face risks if they held too much in their land banks.
"According to the law, relevant authorities are allowed to take back land which has not been developed within a two-year timeframe. So developers reserving too much land will face legal and financial risks."
Established in 1995, Soho China focuses on mid-and high-end residential, commercial and office property.
