Beijing home prices could reach RMB 60,000 per square meter for the first time in 2015, after a record land sale seems to foreshadow a year of expansion for development and a rebound in real estate values.

A large plot in southwestern Beijing’s Fengtai District sold on January 5 for almost USD 1.4 billion, a new record for real estate in the capital. The mixed use site could yield as much as 418,693 of mixed use space.

That a developer, in this case China Resources, was willing to pay so much for a site in Fengtai, long considered a Beijing backwater (it was the last Beijing district to get a McDonald’s), demonstrates two things about the local real estate market: demand for space, especially residential space, in Beijing remains strong, and the supply of available space, especially in or near Beijing’s Central Business District (CBD) is very limited.

The desirability of Beijing real estate is expect to rise as the city’s integration with nearby Hebei province and Tianjin municipality increase. New subway lines, such as an extension of line 6, have brought suburban areas like Yanjiao, just over the Hebei border, are reducing commuting times, allowing more people to buy home around Beijing, and have increased the value of closer locations as they become more convenient.

Although real estate prices soared during the lead-up to the Olympics, rents were at first slow to keep pace. While softness in sale prices has made renting a bit easier over the last few years, Beijing residents should expect a similar rebound in rental prices in 2015.

Photo: World Property Journal