Special Report:  Global Financial Crisis    

    by Xinhua Writers Jiang Xufeng, Shi Qingwei and Wang Zhi

    BEIJING, May 2 (Xinhua) -- Although Chinese housing sales have been picking up, boosted by pent-up demand and falling prices, there have been few signs of life in the non-residential property market.

    Home sales in China rebounded in the first quarter with the average sales price easing, while rents were mostly steady.

    National Bureau of Statistics figures for the first quarter showed that private-sector housing sales volume increased 8.2 percent in 70 large and medium-sized cities, with a 1.3-percent price drop per sq m in March from a year earlier.

    In the commercial property market, both sales and prices were up, because people were buying properties for investment. Yet rents were down and vacancies were up, indicating that a rebound in demand was some way off, analysts said.

    Chen Sheng, vice president of the China Index Academy (CIA), a private-sector research institute that specializes in real estate, told Xinhua that the rebound of the nation's non-residential property market largely depended on the overall economic situation.

    "Unlike homes that are for shelter, the buyers of office buildings, retail and industrial properties purchase them for investment purposes or their own business needs," Chen said.

    China's economy expanded by 6.1 percent year on year in the first quarter, the lowest growth rate in 10 years, reflecting the domestic impact of the global downturn.

    The economic growth rate was 4.5 percentage points lower than the first quarter of 2008 and down 0.7 percentage points from the previous quarter.

    NEED, DEMAND FOR OFFICES DIVERGES

    A report by DTZ, a British-based real estate advisory and consultancy firm, showed that leasing demand for office space in Beijing had begun to dramatically weaken in the first quarter as world economic conditions deteriorated.

    The average first-quarter office building vacancy rate in the capital city rose 5.72 percentage points from the fourth quarter of 2008 to 18.97 percent, DTZ figures showed

    At the same time, average monthly rents for Beijing office buildings fell 9.26 percent quarter on quarter to 207 yuan (30.4U.S. dollars) per sq m.

    Richard Wang, director of DTZ's north China consultancy department, said over-supply was a key problem facing the Beijing office property sector.

    He added that 1.3 million sq m of new supply would come into the market in Beijing this year, mostly in the central business district, where many multinational companies were based. That's more than double the 603,000 sq m of new office building space that came into Beijing's market in 2008, according to DTZ figures.

    At least some of the space coming into the Beijing market this year was affected by the Olympics, as developers had to stop construction work for several weeks before and during the Olympics and Paralympics to fulfill the government's air-quality promises for the Games.

    That suspension, and a decision by some developers to wait for better market conditions, pushed more office space into this year's market, said Billy Ip, DTZ North China's business space-retail director.

    Beijing is not the only city with an office space overhang. DTZ figures showed that office vacancies hit 11.86 percent at the end of March, up from 9.29 percent a quarter earlier, in Shenyang, capital of northeastern Liaoning Province.

    Average monthly office rents in the city fell 2.35 percent quarter on quarter to 145.16 yuan per sq m.

    These figures likely reflect a spending binge in 2008. Total investment in the property sector in Shenyang, a traditional heavy industrial base, was 101.1 billion yuan in 2008, up 38.4 percent year on year. The growth rate was 17.5 percentage points above the national average.

    Not only that, the investment value trailed only Beijing and Shanghai among more than 660 mid-sized and large Chinese cities, said Fan Hanzhang, president of the Shenyang Real Estate Research Institute.

    In the long run, these investments might pay off, Fan said, because secondary cities with the prospects of rapid development meant better investment prospects in terms of value appreciation.

    Fan added that Shenyang's average housing price was less than 4,000 yuan per sq m, less than one third of prices in Beijing or Shanghai.

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