China's new wealthy will pay some of the world's highest prices for a French chateau or neoclassical villa in major cities, but some fear that a property bubble is close to bursting.
Luxury comes home to Beijing
The plush, French chateau-style villas of the Palais de Fortune development lie just off the airport expressway north of Beijing, near a petrol station.
"Construct a legend of fortune, steer the world's power" is what its glossy brochure suggests you do if you live among the rows of smooth-stoned mini chateaus that come with all the hallmarks of conspicuous consumption: balconies, gables, elaborately tiled roofs and more. These remarkable dwellings are what China's newly rich call home. They cost up to 63 million yuan (Dh33.8m) each and are mostly sold to Chinese buyers from the mainland or from Hong Kong long before they are built.
Neo-Gothic, neo-Tudor, neoclassical: China's super-rich are hungry for the look of a European pile combined with the luxury of an Asian high-end villa. These remarkable architectural phenomena are also considered by many to be fuelling a property bubble that is inflating too fast and could burst in the middle of this year. That could have devastating results for the buyers, the banks lending them the money, the local governments that sold the land to the developers and of course the big property companies.
The Palais de Fortune villas are emblematic of China's remarkable rise in the past few years, but are an incongruous vision of European elegance amid the more typical suburban Beijing features of barely paved dirt roads lined with rows of small shops selling everything from dumplings to double glazing. Get inside the compound and you are in another world again, as you pass golden golf carts with badges on the bonnet reminiscent of Rolls-Royce's Silver Lady.
There is plenty of money for buying property. Interest rates are low, the banks are encouraged by the government to lend and it's the government's 4 trillion yuan fiscal stimulus plan that is bankrolling the whole scheme. China's wealth gap is widening and there is a certain amount of resentment about the prices that some of these villas are going for. A recent report by the Chinese Academy of Social Sciences showed that more than 80 per cent of urban residents cannot afford to buy homes.
Last month, the Chinese government announced it would strengthen the supervision of the property market and speed the construction of low-cost housing. Sales tax on homes sold within five years of purchase was re-established after property prices climbed in November at the fastest pace since July 2008. But you don't feel that these measures will have much of an impact here, although rumoured property taxes on luxury housing might.
While the rest of the world is still reeling from the lingering effects of the property-driven credit crunch, China is like London or Dubai or New York in the mid-2000s. There is no shortage of buyers and a feeling that prices are going to keep rising forever. "The first two phases are all sold out, and we've started working on phase three," says Tang Ming, the deputy marketing director for the Palais de Fortune development. "The houses run between 43m yuan and 63m yuan and they tend to be bought by Chinese buyers from Hong Kong and Malaysia, but mostly the mainland - from Wenzhou and Shanghai and Beijing. They are bought by successful people who are busy and want to be near the airport."
The houses are mostly three storeys of 500 square metres per floor. Most are owner occupied, as far as the realtors know, except for one that is rented to the Saudi Arabian ambassador. The developer, who comes from Hubei province, plans to build 84 villas next year on land he has not yet bought. There is already a strong second-hand market in these luxury houses, an unusual development in China, where property tends not be sold on.
People who in 2006 spent 18m yuan on a house in the first phase are selling them on for 65m yuan, Ms Tang claims. Atop the Pangu 7 Star Hotel, just opposite Beijing's National Stadium, known as the Bird's Nest, there are 12 super-luxury residences for rent to the very richest clients. The 770 sq metre Sky Courtyards include such luxuries as private lift access opening into a traditional Chinese courtyard, rooftop gardens, a wading pool and a retractable glass roof.
The double-storey courtyards are built with antique carved wooden walls from southern China and decorated by Sir David Tang, the founder of Shanghai Tang and the China Club. It costs more than 900,000 yuan per night to rent one of these courtyards. Peking House is more accessible, as it is the only villa development inside Beijing's fourth ring road perimeter, which is very close to downtown. These seem positively sensible after the Doric columns and Gothic stylings of some of the suburban developments, although the houses still go for 50,000 yuan per sq metre. Each six-storey building contains two unikts of three floors each.
But only five out of 168 villas are left, with many of the luxury pads snapped up by celebrities such as the actress Li Bingbing, actor Huang Xiaoming, and the singer Yu Chenqin. "Almost all our buyers are Chinese. Foreigners prefer to rent, they don't like to buy houses for 10m or 20m yuan. Most are from various provinces and outside Beijing," says the marketing representative Zhang Xuan. Talk of a bubble refuses to go away, although most buyers reckon that the government is unlikely to try to cool the market too much as a slowdown would have broader economic repercussions.
The situation is even more extreme in Shanghai than Beijing. Last month, at Forbes Park estate in Shanghai's Gubei area, a 700 sq metre villa was sold to an anonymous buyer for 190,000 yuan per sq metre. This is a record price in China's financial capital and nearly double the previous record, an apartment at Tomson Riviera apartments in the Lujiazui financial centre of Pudong district. "The units are too expensive for most Chinese, but not for those who are used to luxury accommodation and high living overseas," Xue Jianxiong, an analyst with E-House (China), told the China Daily newspaper.
And he pointed to prices in Hong Kong of 800,000 yuan per sq metre as a sign that the luxury market in China still has a way to go. "Compared with upscale housing in cosmopolitan cities around the world, there is upwards potential," he said. @Email:firstname.lastname@example.org