Beijing Housing Market Faces SARS

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Last updated at: (Beijing Time) Thursday, June 12, 2003

Beijing Housing Market Faces SARS

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May is usually the golden month for Beijing��s real estate industry. As the public emerges from its winter hibernation, developers launch colorful promotions and offer special features to customers. This May, however, SARS has taken its toll as people seldom go out and real estate dealers cancel promotion activities accordingly.

An official from the Chamber of Commerce for Housing Industry under the All-China Federation of Industry and Commerce predicated that the total sales volume in real estate decreased 40 to 60 percent in May from the same month last year.

At a forum with the theme of creating a healthy environment for living while combating SARS held in Beijing on May 19, housing industry insiders, economists and officials form related governmental departments discussed the impacts of the real estate sector.

Many developers expressed their worries about the future housing market. They said that if SARS cannot be completely controlled soon, investors in real estate will become pessimistic on their chances for profits, and potential homebuyers will lose their confidence in both investment and consumption. In that case, Beijing��s housing industry will suffer a great loss in sales.

Recently, some enterprises have had to postpone their real estate investment projects due to the influence of SARS. For instance, Hong Kong-based China Everbright Technology Ltd. has already decided to indefinitely put off the construction of its development project in Beijing.

According to Zhao Yuhe, General Manager of Beijing-based Yihe International Real Estate Corp., SARS has caused the lowest housing demand in Beijing. He said that following strong sales in the pre-SARS months of the year, the company failed to sell one apartment in May.

The leasing market has seen the hardest hit in the housing sector. A lot of non-local people, including a large number of foreigners, left Beijing for fear of being infected by SARS. Rental agreements were cancelled and new tenants have yet to emerge, leading to almost overall stagnation in this field.

Fan Gang, Director of the National Economic Research Institute of the China Reform Foundation, said that the SARS epidemic affected Beijing��s real estate industry both directly and indirectly. The direct influences consist of all kinds of delays, including the delay or cancellation of house purchasing and decoration, which drastically decreased the number of current order bills and contracts. Also the prolonged procedures for obtaining approval and the postponed investment had a negative impact on the industry. These delays may cause a shadow over the industry for years.

The indirect influences, Fan said, come from the decline of all industries. If people are making less money, they cannot afford new houses or may decide to stop buying them.

However, real estate dealers, economists and construction experts said that despite the disastrous effects brought by SARS, new opportunities have also been created.

The disease will not affect real estate industry as it does to the service sector, especially the tourism industry, experts said. Consumers, especially those who urgently need to find better accommodations have just put off their plans for their plans for new homes, not canceled them. If SARS is successfully controlled within three to five months, the demand will resurge and the market will boom in the second half of this year.

General Manager Zhao said the short-term market fluctuations triggered by SARS could be a much need check and adjustment to the real estate industry, which had been in danger of overheating.

According to An Peng, General Manager of Beijing Pengrun Real Estate Development Co. Ltd., the government will take some measures to stimulate consumption in the housing market in the second half of this year. He estimated that in the months to come, people will show a stronger consumption demand than before, and Beijing��s real estate industry will not only see a sales peak, but also attract more investment.

Sources said that Beijing Land Resources and Housing Management Bureau (BLRHMB) would formulate a series of policies, which include increasing the credit line on housing accumulation fund and lowering the down payment, with an aim to boost the overall housing consumption in Beijing.

The BLRHMB, together with Beijing Construction Committee, are working to map out concerned policies on rent exemption and reduction for operational house leasing in industries heavily hit by SARS, and on enhancing the work efficiency in issuing housing pre-sales license, so as to provide more convenience for both developers and homebuyers.

SARS has also made developers pay more attention to health and environmental standards, Zhao said that at present, buyers are paying more attention to a good environment when finding a new home and developers have had to respond to the demand with actions.

Insiders said the China National Engineering Research Center for Human Settlement is planning to develop health standards for Beijing��s residential buildings, and would implement those standards in the next two years. After the guidelines are fully in place, more than 50 percent of residential buildings approved in Beijing will reach health standards. In 2001, the center construction technical standards, which set public health standards for buildings in terms of living space, air and water quality, sunshine and sound insulation. Buildings that fail to meet the standards might no longer get permission from city construction departments five years later.

Due to the limited land and large population, experts say it is not feasible to only construct large amounts of low-density residential buildings. Therefore, good and efficient designs are essential to the future real estate industry.

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