The survey conducted by the State Information Center shows both great existing and potential demand for house consumption in major cities. For example, 3.3 percent of families in Beijing city proper are living in houses built before 1950, and 27.3 percent in buildings constructed before the 1980s. Experts believe that a considerable number of urban residents can now afford to spend up to 100,000 yuan or more, and their main consumption target will be housing.

Luxury Apartments

As the houses for ordinary Chinese enjoy good sales, luxury residences targeting the overseas market are also gaining favor. Deluxe apartments in two high-rises of the Hua'ao Center in West Beijing have all been sold out at 10,000 yuan per square meter. Another two buildings are under construction.

Shi Li, chief Beijing representative of a foreign transnational company, bought a 120-square-meter apartment there for 11,000 yuan per square meter with a bank loan. Shi, who earns US$2,000 a month, said that he can pay off the loan in seven years based on his present savings and annual income. But, he is among the small number of high-income consumers in Beijing, as well as in China.

Housing industry specialists believe that, in light of China's investment environment and progress in internationalization, luxury residential buildings can easily find purchasers, as long as they have fine quality, surroundings and management services.

Almost all the deluxe residences at Xiangjiang Garden in east Beijing have been bought by foreigners working in China.

Currently, the urban real estate market is facing a trend of brisk sales for luxury and ordinary houses, but dull purchase of medium-grade apartments. High-income earners want the best, or won't buy, while the great number of medium-and low-income people need to improve their basic housing conditions.

Dull Office Building Market

Within the coming two or three years, the Pudong New Area in Shanghai will see completion of more than 6 million square meters of office and commercial buildings each year.

The real estate sector has grown rapidly in Pudong along with the fast development of the area since the early 1990s. By the end of last year, the area had 773 real estate enterprises which had developed 400,000 square km of land and invested a total of 65 billion yuan.

To stimulate the market, the Shanghai municipal government has decided to move 10 major commodity markets, such as securities, grain, metal and technology, and the municipal foreign economic and trade committee and foreign investment committee to Pudong New Area. They will fill some spaces, but idle buildings still account for some 40 percent.

Last year, 137.83 million square meters of buildings were completed nationwide, up 6.5 percent over the previous year, while 70.38 million square meters lay idle, a rise of 25.4 percent. Successive years of sluggishness in the real estate market have led to a poor occupancy rate for commercial houses, placing some developers in a tight corner.

Some pessimists predict it will take 10-15 years for China to sell all the existing office and commercial buildings.

Xie Jiajin from the Real Estate Department of the Ministry of Construction thinks otherwise. He admits the real estate market experienced unchecked expansion in the early 1990s, but argues that the State made timely macro-regulation to create a favorable development trend.

In the first place, he said, the country's economy is growing rapidly, and the State is encouraging development of tertiary industry. Therefore, office and commercial buildings will have a considerable market demand. Moreover, macro-control has limited the construction scale, thus reducing potential supply.

Take Beijing as an example. The years 1993 and 1994 saw the start of numerous office buildings, thus ushering in a peak period that led to over-supply. The city began to control this category in 1995, helping ease the contradictions between supply and demand.

At present, demand for office buildings in Beijing is rising at an annual rate of 10-15 percent. This indicates an optimistic prospect.

(No. 52, 1998)