November 28, 2007
Sample Beijing Apartment Sale and Rental Prices
Here’s a flyer for October from Century 21’s branch office in my development here in Beijing. The top section lists apartments for sale and the bottom section lists apartments for rent. You can see that the smallest apartment listed for sale, one room at 59 square meters (635 square feet), is selling for 1,150,000 yuan (US$155,466). That’s 19,491 yuan per square meter (US$244.82 per square foot). The largest apartment listed is four rooms at 206 square meters (2,217 square feet) for 5,150,000 yuan (US$696,218). That’s 25,000 yuan per square meter (US$314.04 per square foot).
The rental prices range from 3,200 yuan (US$432) to 11,000 yuan (US$1,487) per month, with most listings for two to three bedroom apartments falling in the 5,500 to 6,500 yuan (US$743 to US$878) range.
I think the average monthly income in Beijing is around US$300 to US$500, so even renting, let alone owning, one of these apartments is a wild dream for the great vast majority (the “average” person). China’s new middle class gets lost in the averages, but they definitely exist and are anxious to start consuming like Americans — houses, cars, big-screen TVs, private education, winter vacations on the beach, you name it.
November 28th, 2007 at 7:33 pm
it is funny, i just sold my apt at hou xian dai cheng at rmb 14500/sqm today.
November 28th, 2007 at 8:01 pm
Interesting! In UK, in a typical residential apartment development, I would design a 1 bed to around 30-40sqm, 2 bed up to approx 70sqm… the apartments advertised seem huge to me… is this the norm in Beijing?
November 28th, 2007 at 9:33 pm
@ucla: You didn’t tell me you were selling… now what? Do you plan to rent or buy another place?
@Ken: The apartment sizes are a bit deceptive because the Chinese measure two different ways: “built” size and “actual” size. Actual size can be 60-80% of built size, depending on apartment, so an advertised 100 sqm apartment could actually be as small as 60-80 sqm. Do you see what I mean?
November 28th, 2007 at 11:18 pm
it just happened so fast. i put it for sale at rmb 15000/sqm for some times, but nobody came in. in the mean time, i found a nicer and bigger apt at guan hu guo ji. i was thinking to use the proceeds as the downpayment. so i sold it at a discount. hou xian dai cheng is my investment property, i don’t live there.
November 29th, 2007 at 3:36 am
If they are paying those prices, then they ARE consuming like Americans.
Assume 5% 30yr. FRM. Taxes & insurance NOT included below:
A 2 room sells for (USD) $270,000, mortgage payment is $1,500, and rents for $743.
A 3 room sells for $340,000, mortgage is $1,800, rents for $810.
I’d be a renter.
Is there a mortgage interest deduction in China?
November 29th, 2007 at 4:26 am
- Hot money
Isn’t the high housing price in part supported by
investers from overseas (expecting RMB to appreciate)?
What if RMB did appreciate 40% overnight? Will the hot money leave promptly as Andy Xie mentioned in thie FT.com interview? (http://www.ft.com/cms/893ac9c8-757e-11dc-b7cb-0000779fd2ac.html)
-Price-to-rent ratio
So what is the price-to-rent ratio in this case, > 200 ?
How does it compare to US? This article talked about
US housing price-to-rent ratio is deviating from the
norm.
http://money.cnn.com/2007/11/06/real_estate/home_prices.fortune/index.htm
November 29th, 2007 at 6:49 am
Maoxian, do you think the prices will come down after the olympics? I want to buy a 2-3 bedroom but am thinking its best to wait?
November 29th, 2007 at 7:29 am
The ratio of price to rent is almost 10 times higher than in Toronto here, the house is definitely over priced if you invest for rental income, but looks like the demand is still high for now. like daytrading, its time to watch out for the reversal signal.
when the bull get tired, bear will creep in, naturally, just be careful.
November 29th, 2007 at 8:30 am
Is this representative of prices in Shanghai? Or is Beijing more expensive?
November 29th, 2007 at 9:52 am
RiskR:
I was in Shanghai a few months ago. I know a 135 sqm apartment in Pudong that sells 20k Yuan /sqm rents for 9.5k Yuan/month.
November 29th, 2007 at 10:12 am
@ucla: Where is Guanhu Guoji? Your Hou Xiandaicheng investment was pretty savvy — big gains in a very short time.
@CapGain: No, there’s no mortgage interest deduction and there’s a 30% mandatory down payment and all loans are variable (no fixed available) — it’s nice to be a Chinese bank in other words.
@werdna: Yes, there’s a lot of hot money at work but you have to remember that the local Chinese have next to no outlets for their savings (which are both enormous and currently earn a negative rate of return in the bank). It’ll be a cold cold day when the RMB appreciates 40% overnight (only a true lunatic like Xie could even imagine such a thing). I’ve never done a price to rent ratio but it should be easy enough to figure out on average from this Century 21 sheet.
@Nik: Everyone asks me this and I have no idea … remember that when we moved here in May 2005 I thought that the market was already insanely overvalued and was dead-set against buying … fortunately She Who Must Be Obeyed overruled me (once again) and instantly bought a place. That said, I wouldn’t be a buyer here but what the heck do I know given my track record? ;-)
@Yang: Real estate is such a slow-moving ship and of course I know nothing about speculating in it … I’m just a humble homeowner with no plans to move.
@RiskR: I don’t know what the Shanghai market is like but I imagine it’s similar. Given werdna’s info (thanks, werdna) of 20K per sqm in Pudong, it looks similarly priced.
November 29th, 2007 at 1:07 pm
guan hu guo ji is right by east 4 ring, east of chao yang park.
December 4th, 2007 at 11:50 am
@werdna: You can see that the price-to-rent ratio is very high… 100 sqm priced to rent at 5,500 would cost 2,000,000 to buy (P/R: 363x); 123 sqm priced to rent at 6,500 would cost 2,460,000 to buy (378x) … isn’t 200x considered the upper bound of bubbleville?