APPD Market Report Article

Beijing

August 26, 2022

Mi Yang, Head of Research, North China

0.1%

RMB 149

Growth
Slowing

Luxury apartment sales hit a record high

  • A total of 2,477 luxury apartment units were sold in 2Q22, up 1,629 units q-o-q, the highest quarterly level in a decade. The concentrated release of recently launched projects and the promotion of existing projects led to the release of suppressed demand, driving up the sales volume.
  • In 2Q22, the People’s Bank of China lowered the loan prime rate (LPR), the largest drop since 2019. The relatively loose monetary policy has boosted market confidence. Supportive real estate policies based on local conditions have sent a more positive signal. The obvious increase in sales reflected that the pace of market stabilisation may accelerate, or possibly even rebound.

Concentrated release of new projects pushes supply to remain high

  • As developers accelerated the launching of new projects to meet half-year sales targets, luxury apartment supply continues to remain stable in 2Q22, with a total of 2,218 units launched. The accelerated frequency of policy regulation and loose monetary policies have boosted developers’ confidence in the future market.
  • The second centralised land auction was finalised in 2Q22 with 14 land plots transacted, which was fewer than last quarter. However, the average premium rate increased by 0.95 ppts q-o-q. Competition for land in prime locations was fierce, with most of the land taken by state-owned enterprises, showing developers’ optimism about the market.

High supply and demand in luxury market stabilises prices

  • High demand and sufficient supply resulted in relatively stable luxury apartment prices in 2Q22, which was up 0.2% q-o-q on a like-for-like basis. Considering that developers have chosen to give priority to sales volume to meet mid-year targets, the price of new projects has not risen significantly.
  • Leasing demand is backlogged by the resurgence of COVID-19 cases in May. With the resumption of the leasing market in June, suppressed leasing demand was gradually released and rents remained stable, recording a slight increase of 0.1% q-o-q.

Outlook: High supply and demand set to continue

  • High-quality plots released in the second centralised land auction effectively ensured future supply. Rising demand is forecast to accelerate the pace at which high-end projects enter the market. It is expected that the new high-end supply will remain stable in the following year.
  • The accelerated frequency of policy regulation is expected to stimulate fence-sitters to enter the market. In the short term, the market transaction volume is anticipated to remain strong, likely pushing high-end residential prices to rise steadily.

Note: Beijing Residential refers to Beijing's overall luxury and high-end residential market.

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