With the benchmark stock index losing almost 10 percent this year and regulations tightening on overseas investments, China’s rich have been turning to luxury property at home, defying a government trying to cool the market. “Luxury homes are still investment darlings of rich people,” said Albert Lau, the head of Savills China, “They will still buy properties rather than sit there to see their money losing value every day.”
Chinese fortunes are now hard at work building – and selling – palatial properties. A four-bedroom, ground-floor apartment with terrace in Shanghai’s exclusive Lakeville apartment complex sold in May for 60 million yuan ($9.4 million). The fixtures in one bathroom alone are valued at around $50,000. They include designer Italian taps, mosaic walls, a jade sink, and a “throne” with buttons to adjust the water temperature.
Sales like this one at Lakeville, a relatively new complex, are representative. According to Shirley Tang, the associate director of residential sales at Savills, which is marketing all of the 18 units in Lakeville’s four buildings, about 70 percent of the apartments – including a 110 million yuan ($17.2 million) penthouse – have already sold since entering the market at the end of 2010. About half of the buyers (mostly Chinese) made their purchases in cash.
This July, Longfor Properties Co., controlled by China’s richest woman, Wa Yajun, put 1,002 villas in Yantai worth a combined total of 2 billion yuan on the market. Longfor Properties reports that contracted sales rose 31.4 percent this year and it shows: the villas sold within two weeks.
It’s Beijing’s Heritage Estate, or Diaoyutai Courtyard No. 7, that has bragging rights to being China’s most expensive apartments at 300,000 yuan per square meter per year. Amidst booming sales, the Bejing government halted all transactions at the complex this June and began investigating the developer for potential profiteering.
All over the country, government interference remains the biggest threat to property transactions. Chinese authorities have vowed to crack down on “speculative capital” by introducing property tax in Shanghai and Chongqing, enforcing higher down payment requirements, and limiting the number of properties purchased in metropolitan areas by each family.
Liu Yuan, a researcher at Centraline Property Agency Ltd., China’s biggest property brokerage, referred to government inhibitions when saying, “People still have a lot of money; the only problem is eligibility for purchase.”
The effects of government limitations are beginning to show at some luxury complexes. Shanghai’s Meihua Garden, developed around Madame Chaing Kai-shek’s former residence, offers three-bedroom, 250-square-meter homes for between 14 and 19 million yuan. It is reported that very few units sold last month.
“Those rich people, if they want to buy, they always find ways,” said Jenny Zhan, senior associate director for residential properties for eastern China at broker DTZ Holdings Plc . Even still, Zhan also admits that, “Most buyers are waiting to see the direction of government policies.”
photo credit: tomson riviera, shanghai