Whatever the Washington Post says, this is a great time to be a foreigner working in Beijing.

Although restrictions on where foreigners can live remain in force, expats with good jobs can look at a luxury apartment rental market where prices have fallen by an average of around 50 percent since their peak in 1995. And that trend looks set to continue for the foreseeable future as more foreign-sale properties come on the market and vacancy rates rise.

The current situation represents a major turnaround from the early 1990s, when foreign residents and companies were restricted to a very small number of hotels and office buildings.

A change in policy in 1992 gave foreign investors significant incentives to invest in what quickly developed into one of the world's most expensive property markets.

The outlandish prices for foreign-sale and rental -- coupled with the fact that ordinary housing was hardly traded at all-skewed the overall statistics to such an extent that Beijing was regularly cited as one of the world's most expensive cities.

This made curious reading to anyone who stepped outside the privileged foreign enclaves to shop, eat, or take a bus, but made sense to accountants paying US$10,000 dollars a month for staff apartments.

The construction boom fuelled by foreign investment turned the supply-demand equation on its head. Beijing now ranks third worldwide in terms of vacant commercial space (behind Beirut and Shanghai).

In the luxury residential sector, the government's target cap of 20,000 units has already been breached the latest completions brought the total stock to 25,600, and that figure is expected to rise to around 30,000 by the end of this year.

This is clearly good news for consumers. With 4,200 luxury residential units completed last year, average rentals for prime service apartments fell 18.7 percent to US$34.2 per square meter per month, according to a report from property consultants CB Richard Ellis? global research and consulting department.

For ordinary unfurnished luxury apartments, rentals dropped 22.8 percent to US$21.2 per square meter per month; average rentals for townhouse properties lost 15.1 percent to end the year at US$22.9 per square meter per month.

It is a different story for developers and investors. The market is rapidly polarizing between a few top-level properties with the very best locations and services, and the larger group of residences with less to offer potential buyers and tenants.

The former are, by and large, doing well in holding on to tenants without sacrificing too much of their rental yields. Extremely high yields (up to 20 percent) in the past have supported high sales prices, and they continue to do so, even if to a lesser extent.

High rentals are supported by a more stable balance of supply and demand at the very top end of the market -- especially in terms of the townhouse/villa developments targeted at expatriate families ?where the scale of development has been smaller.

This is not to say there are no problems at the top level. Many of the multinationals which generate of this sector's leasing activity are cutting their expatriate housing allowances by 10 to 30 percent. Sales have been hard hit by the Asian financial crisis as most buyers have come from Hong Kong, Singapore and Taiwan.

A rise in local sales has only partially offset this development. Investors wishing to sell up and move on are likely to have a hard time finding buyers. The international market just is not there, according to a marketing director who has run his business in Beijing for five years, and it is difficult to get exposure to potential buyers in the local market, which is in any case very limited. The last thing many nouveau-riche da kuan (fat cats) want is to flaunt their wealth by acquiring a flashy villa.

However, looking forward two or three years, prospects still appear good ?relatively few top-grade projects are set to come on the market, while more large foreign companies are likely to move into Beijing, especially if and when China enters the WTO. Investors considering buying can therefore still be fairly confident they can achieve good rental yields, as long as they can land a stable tenant.

For the rest, and particularly those in the market for high-rise apartments which account for 80 percent of luxury accommodation, things are looking pretty gloomy. The good quality villas do not have to worry about finding clients as long as they are willing to make some price concessions, but very severe competition is raging among the high-rises.

Developers keep asking prices high in order to preserve the face value of their properties, but the real transaction prices are getting much lower as tenants gain increasing power to negotiate. As prices come down in the top-level units, many tenants are finding they can move up in class for little or no extra cost, which exacerbates the polarization of the market.