The residential property downturn in Beijing claimed a major casualty earlier this summer the Hong Kong Mainland company, behind the Rose Garden Villa project in Changping county became the largest joint venture in China to go bankrupt. Located about 25km from downtown, the complex was to consist of 800 villas.
However, the downturn brought on by the Asian financial crisis has had a positive impact on foreign residents in Beijing in the form of cheaper housing. The price of accommodation has fallen as a result of foreign companies withdrawing overseas staff and tightening the budgets of those who remain. The oil companies have been prominent in reducing staff numbers, says Mr. Geoffrey Maung of Jones Lang LaSalle in Beijing, although the cutbacks have been across the board. According to one report, the capital's expatriate population fell by two percent in the first quarter of 1999.
"This year a lot of foreigners are leaving, which has led to a lot of empty villas and apartments in Beijing," says Ms Helen Wang of local real estate agency BSH Estates. "In addition, many companies have cut their staff budgets." She adds that in a typical month last year her company would be approached by five companies looking for accommodation – this year it is down to just one or two. The peak years of 1994 and 1995 now seem a long time ago.
Since accommodation is segregated, the impact on the relatively few apartments and villas for foreigners has been swift. According to Maung, villa prices have fallen by 20-35 percent over the past year. A property that would have been rented for US$11,000-12,000 a month in 1998 is now likely to fetch no more than US$8,000.
Maung says apartment prices have also fallen, by 10-20 percent, although much depends on the individual property. Wang estimates that overall property prices for foreigners have come down by 30 percent this year, although the five or six high quality villa complexes have held up relatively well, their prices falling by just 15-20 percent.
Dearth of new developments
The purchasing market has almost ground to a halt, despite a plunge in prices. A villa at Legend Garden Villas, a 389-unit complex near the airport, which was on the market at US$500,000-600,000 in 1994 can now be bought for US$200,000-300,00). Legend is a large villa and apartment site located close the airport and comprising 389 units. Ms. Zhu Yan, general manager of Legend Garden, says Beijing villa prices are now lower than in Hong Kong or Taiwan.
The fall-off in demand has certainly hit construction activity in the villa market. In several cases work on new phases has been halted, leaving residents complaining that their surroundings resemble a mothballed building site. Even so, several leading complexes have added new phases this year although only one new resort has opened in recent months – Wangjing, containing 30 new properties. By July the stock of villas in the city stood at 3,247, according to FDPSavills. The dearth of new villa developments is also partly a result of tighter state control over the release of new land for high-end, low-density projects that was put in place in 1996.
This uncertain environment has persuaded developers to accept shorter contracts and to renegotiate terms with clients. One-year contracts are now the norm, down from two years, and several six-month deals have also been signed.
The quality of construction work is the most important variable in choosing a complex, according to Maung, although the level of management service also varies significantly. Since families dominate the villa market, the availability of local amenities and the greenness of the environment are also big factors. Selling points include proximity to downtown areas, the airport and local facilities such as shops and international schools.
Most agents cite Riviera, River Garden and Capital Paradise as being among the most popular complexes, offering high quality building standards and a good management service. Maung singles out Eurovillage whose small size ? it contains just 50 villas – coupled with the high standards laid down by its German investors, make it highly attractive to foreigners in the capital.
Around 90 percent of villa accommodation is furnished, according to Maung, with landlords typically buying the furniture before letting out the property. The result is that there is very little price differential between furnished and unfurnished proper-ties – about US$150 a month, according to Wang. Families wanting additional items are likely to be asked to pay a little more.
Although property is segregated, a large number of lower-income foreigners choose to live in compounds built for locals. Here, standards are improving all the time as developers respond to an increasingly discerning local market. For example, in Beijing Vanke Golden City, a suburban townhouse/apartment complex developed in 1993, about 100 units are sublet by Mainland Chinese to foreigners. The complex is especially popular among embassy staff from developing countries, who typically pay a monthly rent of just US$1,000 for a three-bedroom house.
On the other hand, the overall slump in property prices means that most foreigners can now afford ?legal' housing, where the standards are higher and where there is no likely threat of eviction.
The new regulations
The registered capital of a holding company shall not be less than US$30m. The amount of outstanding loans borrowed by a holding company shall not exceed four times the paid-in registered capital. If, because of business demands, the outstanding loans will exceed four times the paid-in registered capital, Moftec approval is required.
Holding companies are encouraged to set up technology research and development centres or departments in China to engage in the research and development of new products and high-technology, to transfer the achievements of the research and development, and to provide related technical services.
Holding companies may sell, either as agents or distributors, products of their subsidiaries in China and overseas markets.
Holding companies may provide their subsidiaries with comprehensive services, including transportation and warehousing. Holding companies may buy commodities not subject to export quota or licence on the domestic market for exporting purposes.
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