"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner
Sunday I received an email from a real estate broker offering a huge discount on an apartment in Fortune Heights (御金台), one of Beijing’s top apartment buildings, located in Beijing CBD. The reason for the discount? The seller desperately needs to raise 20 million RMB for his company.
I have roughly translated and paraphrased parts of the original email:
1，基本情况：御金台超高层，3-2-2，超优质户型；235平米，北向景观一览无余！此房为一手业主，全新房，从未住过人；客厅、卧室、厨房都是豪华装修！带有大衣帽间！High floor Fortune Heights apartment, 235 square meters, original owner, brand new, never lived in, luxurious fittings;
2，出售原因：因此业主公司急需现金约2000万，为筹集资金忍痛将此房超特价出售！Reason for selling: The owner urgently needs 20m RMB cash, so is biting the bullet and selling at such a special price;
3，权属：业主为一手业主，有本无贷款，交易方便！且同时此业主为本公司老业主，授权我公司出售！Seller is the original owner, there is no mortgage on the property;
4，价格：此价格绝对为御金台乃至CBD超优质超特价房源，御金台均价在8万左右，最高价格为13万出售，而此房只以1300万全款出售！仅合单价约5.5万，此房总价低于市场500万！绝对超值！This price is absolutely a deal for Fortune Heights and in fact all of CBD. The average selling price in Fortune Heights was 80,000/sqm [he means when the developer sold the units] the most expensive apartment sold for 130,000 RMB/sqm. This apartment is selling for ONLY 55,000 RMB/sqm, 5 million RMB below market price.
御金台简介：About Fortune Heights:
1、御金台为60层塔楼，共199米，180户，户型面积110平方米至800平方米之间，其中以200-400平方米为主，均价80000元/平方米，高档豪华装修！60 Floors, 199m tall, 180 apartments, apartments ranging from 110 to 800 sqm, most in the 200-400 sqm range, average price 80,000 RMB/sqm
2、此楼盘为北京最高端楼盘之一：地段、楼盘、周边设施、品质等均居北京楼盘前列！宋丹丹、李嘉诚等知名人士在此均有房产！One of highest end buildings in Beijing [It is]..Song Dandan and Li Ka-hsing are among celebrities who own here.
I know of other Fortune Heights apartments currently on the market at 68,000 RMB/sqm, so this apartment is offered at a 19% discount to what other sellers think is the “market price”. The seller may even make money at this price, as while the average original selling price at Fortune Heights is claimed to be 80,000 RMB/sqm, I know people who bought firsthand for around 40,000 RMB/sqm.
I forwarded the note to a friend who already has one apartment in the complex. My friend went and looked that afternoon, as did 10 others, according to the real estate agent. Perhaps he exaggerated about 10 other interested parties, but I think this apartment will sell quickly.
Beijing still has a fair number of people with a lot of cash looking for a place to invest it. There is also an increasing sense that the government is going to loosen real estate restrictions in the not-too-distant future, and when it does prices, at least for good properties, will start jumping again. Or at least that is what some of my more affluent Beijing friends seem to believe.
This is just one small and possibly meaningless data point. China bears may jump on it and say that this is a sign that more and more property owners will be forced to liquidate, triggering a cascading decline in real estate prices. If this place sells quickly, bulls might say that this shows there is “money on the sidelines” waiting to pounce at prices not too far below what people assume is the current market price. “China will muddle through” types might see this as a sign that not all rich Chinese people are fleeing for the exits, that the desperate seller was not carrying a mortgage on the property so it is not clear that any part of the official or shadow financial system will be harmed by the distress sale, and that there is still healthy demand for real estate.
I really don’t know what it means, and if/when the property sells I will post an update.
The economy is ugly in China right now. But ugly does not necessarily mean collapse, and I have never understood why there are such binary views of China, with it either on the verge of crashing or taking over the world.
If I were a big China bear I would consider pulling in some bets. The mainstream media coverage is tilting towards near unanimous bearishness and the short trade may be getting a bit crowded. At the end of last month I talked to a friend who services Asian hedge funds for a tier 1 bank. He told me that many of his clients were getting killed as they had finally jumped onto the short China bandwagon near the end of Q3. Maybe they were just early. Or maybe when the trade is so “obvious” it is probably not going to be a money maker, especially when the markets here are so policy driven and we appear to be closer to the end than the beginning of the tightening cycle.
As for whether 55,000 RMB/sqm is a reasonable price for a top end apartment in Beijing CBD, I still believe most of what I wrote in April 2010:
We are starting to see the emergence of a Greater Beijing Metropolitan Area, along the lines of the Greater Tokyo Area, stretching east, north and south into Hebei and Tianjin. The eastern expansion of CBD and the Tongzhou New City (video here, in Chinese but with lots of pictures) are just two examples of this sprawl, a trend that will likely make central Beijing property even more desirable and expensive. The government is massively upgrading the public transportation network (see a map of the planned subway expansion) as part of this expansion of Greater Beijing.
The rising prices in Beijing are very painful for many Beijingers. But I think we are watching Beijing evolve into a truly world-class city, along the lines of New York, Tokyo or London. How many New Yorkers or Londoners or Tokyo residents can afford to live in the city center as opposed to commuting in from a suburb? The same dynamic is at play in Beijing.
In case you are interested in a prime property in Beijing, here is the original email, complete with the agent’s contact info: