Hong Kong's Hutchison Whampoa Property has pulled out of a Yn10bn residential development project in Beijing after the municipal government set the land price at twice what the company was prepared to pay, South China Morning Post said. The company only recently started first-phase construction of an additional project in the capital, a Yn3bn residential development in Yaojiayuan, against an original target date of late last year.
Hutchison's case illustrates the problems in Beijing's overheated property market. The city is currently undergoing a property construction boom, with developers expecting demand surges from foreign businesses and from the 2008 Olympics. However, projects must be completed or nearly completed by 2007, when the city government will ban construction cranes from central Beijing to protect the city's skyline. Consequently, supply will outstrip demand over the coming five years. The vacancy rate already stands at 26 per cent for residential space and 18 per cent for office accommodation.