Economy

Villas still give investors home comforts

By Yu Ran (China Daily)
Updated: 2011-02-21 09:49

Hedge for wealthy

The government reduced the amount of land that could be used to build villas in 2006. This promptly made investors realize the buildings were, in effect, limited editions and could command a premium price. The restriction imposed by the Ministry of Land and Resources prevented any property developer from building single villa projects.

According to the regulation, a villa is defined as a house in which there is less than 0.6 of a floor-area ratio. (For example, if the land occupied 100,000 square meters, the floor area of the building must be less than 60,000 square meters.)

Some property developers spotted a loophole that, if exploited, could yield bigger profits. They built two adjoining villas with a floor-area ratio higher than 0.6 and then knocked them into one after selling them to a client.

The villa market has proved to be a hedge against financial downturn.

"After the huge depression in the real estate market caused by the financial crisis in 2008, the villa market in Beijing recovered within two years," Zhang said.

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According to statistics on Beijing Real Estate Transaction Management's website, more than half of 120 villa projects for sale were sold in March 2009, an increase of 320 percent in one month.

He Fangxi, a sales manager at a real estate agency in Beijng, said that inflation has affected decision-making regarding high-end property among wealthy investors who have started to worry about depreciation of the currency.

For example, an apartment in Sanya, in Hainan, that sold for 140,000 yuan in 2005 is now worth 480,000 yuan or more. Average house prices there are equivalent to those in major cities such as Beijing and Shanghai. In Haikou, the provincial capital, the monthly rise in house prices has reached 5 percent.

Although house prices are rising by about 1,000 yuan a square meter every day, people are buying them as casually as if they were picking up tomatoes in the supermarket, said Chen Tianshan, a local real estate developer.

"The price potential of luxurious villas in Hainan hasn't been discovered yet because construction across the whole island is still under way," Chen said. "Therefore, the value of properties in Hainan, especially in Sanya, will continue to rise."