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Colliers: Policies to have minor impact on luxury property demand

BEIJING: The strict controls on the overall residential market by China's central and local governments is expected to have relatively moderate impact on demand for luxury residential properties, Colliers International said in a report.

It based its conclusion on growing enthusiasm for investing and sustained purchasing power from diversified consumers, adding that healthy economic fundamentals and the improved quality of units available should help to ensure a positive outlook for the luxury residential property market.

According to the Colliers International Beijing Knowledge Report 3Q 2010, tightening policies caused a halt in overall luxury residential sales during the quarter. However, there were signs that sentiment had turned positive, citing the rebound of transaction volumes and stable average sales prices.

"Under the collective impact of growing leasing demand and tight existing stock, the leasing market remained active in this quarter, as forecast in our previous report, with the overall vacancy rate declining and the average rent escalating during the quarter," it noted.

The research house also expects the Beijing luxury residential market to receive 5,632 units of new supply in the remainder of 2010 — the largest quarterly record in recent years — as many developers chose to launch pre-sales of new projects in the fourth quarter — traditionally, the high season for the residential sales market — together with projects postponed from 3Q10 to 4Q10.

Although rental demand and owner-occupancy for luxury properties is expected to remain stable, the concentration of new completions in 4Q10 and a seasonal impact on the leasing business in the last quarter should see an increase in overall vacancy.

"In the medium term, the market will continue to have limited supply, since land granting for high-end residential developments is to be restrained, according to the notice of strengthening the land management and construction management, which was jointly announced by the Ministry of Land and Resources and the Ministry of Housing and Urban-Rural Development on Sept 27, 2010.

"As a consequence, optimistic market sentiment should prevail broadly, with growing expectations on asset prices over the medium term. But, given the current and continued austerity measures on the residential market, the average price growth should be small in the next quarter," the report said.
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