Archive for General News

New Record! Shanghai Shimao Sheshan Club sells Villa at 205 Million RMB

 


Shimao Sheshan Villa's

Shimao Sheshan Villa

Shanghai’s Sheshan Shimao Country Club Developement just broke the news that they completed the sale of two villa’s.
One of the two sets a new record as most expensive personal residence in China. It set it’s buyer back for a hefty 205 Million Rmb or about 30 Million US$. The other smaller unit sold also cost an impressive 155 Million Rmb.
Though these are china’s most expensive residences buy total price, it’s actually very “cheap” if you think about it in per square meter price.
The bigger unit is about 26400 Square meters large which  puts the per square meter price at only 7700 Rmb.
Now that’s a real bargain considering many of the downtowns luxury residences commanding as much as 120′000 per square meter.
Also, the latest statistics also report a 38% spike in transaction volume, though I doubt that’s the market recovering, I’m glad to have some good news in all this turmoil.
For luxury properties this number is actually even higher, 45% for the month and 72% ytd.  

Check out the official Shimao Sheshan Villa Website. 40 Acre Domiciles in Shanghai sound like a way to live!

Filed under: China Real Estate, Developements, General News, Market News, Shanghai Real Estate News | , , , , , , |No Comments

Shanghai’s new 7 Year “citizenship” rule

The new 7 Year “Shanghai Citizenship” law has taken effect.
There are millions of immigrant workers in Shanghai, many of them unregistered.

Why did they choose not to register?
Well, some of it has to do with laziness, but to the more affluent it’s the social care and taxes.

See, if you register, and have an income, you get taxed here.
But before, your tax didn’t really benefit you, your benefits are in your hometown, where your houshold registry is (hukou ben they call it in chinese).
So, why pay for other people’s social care?

This has changed, to incourage more talent to come to the city, Shanghai with arguably the best social system in China has taken an important step with the 7  year rule.
If you’re a qualified “talent” in the shanghai workforce for 7 years you can apply to have your household registry moved to Shanghai.

This move was largely influenced and advocated for by the in ‘08 newly created Shanghai Real Estate Commitee.

Filed under: General News, Market News, Shanghai Real Estate News | , , |No Comments

Tomson Riviera occupancy at 20%, called a success…

The infamous Tomson (thomson) Riviera has begun renting it’s “not selling” units in october 2008.
By November it had already rented 8 Units and the count stays at 12 as of today.

This translate in a little below the 20% occupancy mark, which the developer has called a success.

Well, given the current turmoil, renting 8 units of 70 thousand renminbi and upwards is probably not bad, but I do not think you can call 20 percent a success either.

Tomson has been plagued with sluggish (none) sales, and decided to begin renting in 2008.
The 430 to 670 square meter units are selling for an average of 130′000 RMB per square meter.

Being in the business for a while, I know that there are quite a few buyers around that purchase properties at these and even much higher prices (for example in the french concession).

Among industry insiders, the general consus is; that the problem is/was the marketing of the property.
By being awefully strict, and making it very difficult for people to see or get info about the units in the tomson riviera the developer had managed to alienate many potential buyers.

A huge number of the “rich” in china are not comfortable to share their income statement (if they even have one), and they don’t want to be bothered to fill out a form, add a bank statement and all kinds of things to see a place.
They’re simple people, I’ve seen it more than once, that somebody rides a motorcycle in the simplest clothing possible in front of an agency and ends up buying a 20 Million Rmb old house the same day.

I guess they had the right idea, make it exclusive, and don’t let everyone in. But it was executed poorly.
And now this beautiful (truly amazing) property is just sitting there, in the middle of shanghai’s financial district, watching as the lakeville regency and french concession houses are being picked up at the same or even higher prices.

Filed under: General News, Market News, Shanghai Real Estate News, Trends | , , , |No Comments

Shanghai Real Estate’s last goldmine

When property first started getting hot here, most investors came and, well, made amazing fortunes.
After the 2005 downturn, property was still hot, but more of those investors already had quite some capital to go around with, and they knew the boom-days for flipping are over.

I remember talking to some of my Whenzhou Customers, who buying up small properties everywhere, whenever they could, 3 or 4 a month usually, sometimes more.
They weren’t planning on selling the places in the near future, but they bought everything as long as the investment could attain the magical 8% return on capital by renting it out.

Obviously, Today, I think if any of the new apartments can get a 2% RoC they’d be doing pretty good already.

Shanghai’s French Concession is different.
Maybe it’s the trees, the tranquility, the neighbors, the small town feeling, the downtown location, the historical architecture, old treasures and mystery or any of the other things that this area has going for itself.

It’s hot, old houses that anybody but shanghainese, can buy are low on supply but very high in demand.
The same is true in the french concession’s rental market.
Also because most original landlord’s have “different tastes” than western tenants expect in renovation and furniture.

What makes a good place in the french concession?
It’s some outdoor space, a good location, a clean lane, and quietness.

Though not in the plenty, there are properties in the french concession that fit this description and are still attractively priced.
To me these prices are around 25′000 Rmb to 30′000 Rmb.
To illustrate this with some simple examples I take the average of this range which equals 27′500 Rmb per square meter. 
And multiply it first by 65 which is about 1′620′000 Rmb. 

Now, our ideal 65 square meter 1 Bedroom place in the french concession would be somewhere between jianguo rd and changle road, east of Huashan and west of Changshu Road.
It has high ceilings, and is a ground floor with Garden.

The Garden adds siginificant value, and the high ceilings offer the possibility to add a lot of extra space. (sometimes, part of the garden can also be added).
The Renovation will cost you between 80 and a 100 Thousand Rmb, we’d add radiators, double paned windows, and some humidity control, plus of course, the modern, renovation.

To our experience, if well done, the place will rent between 12 and 15k rmb. Depending on the space added and sqm of the Garden.
This means, RoC will be between 8% and 11%. 
Now theory is the smaller the place, the higher the return.

The same calculation with a 100 square meter place that would cost about 2.75 Million Rmb.
Usually these places rent faster, but for less per square meter. Ideal place here has a garden, or terrace, and is a two bedroom.
It will probably rent between 16k and 25k a month.
In this perfect world the least we would get 192000 Rmb a year, or 5.26% RoC.
The median rent would be around 20 thousand a month, 240′000 Rmb per year or a 6.57% RoC. The best case scenario would yield 8.21% a year.

These are a few places that savvy investors picked up, remodeled and rented through us.
This Wuxing Road Place in the picture above has been rented out for 2 years and yields around 7%.  

This ground floor garden property  set the landlord back about 2 Million and has been rented out for 15k last month, which translates into a RoC of 9% per year.
It isn’t for everyone, countless missteps by other investors have shown the risks.
But a sharp mind, a good eye, a calculator, vision and knowing when to make the move will offer rewards, especially in times like these.

Filed under: Economy, General News, Market Theory, Shanghai Real Estate News, Trends | , , , |No Comments

China’s Industrial output grew 5. 7%

According to official statistics the country’s industrial output grew 5.7% in december or 0.3 percentage points faster than the month before.

Light industry is outgrowing heavy industry in these harsh times.

In December 2008, China’s light industry enjoyed an output growth of 8.1 percent year-on-year, which sharply outpaced the 4.7 percent growth of heavy industry.

I think the next line is very intriguing;

In December, state-owned and state-controlled enterprises witnessed an output drop of 0.6 percent, while that of private enterprises went up 16.3 percent, overseas-funded enterprises was up 0.3 percent.

Filed under: Economy, General News, Market News, Trends | , , |No Comments

I just finished reading this great article…

.. about shanghai’s real estate market on the great freakonomics blog.
It’s a guest post by Nathan Myhrvold former CTO of microsoft and founder of Inventing Company Intellectual Venture.

A few excerpts from the post

the reference goes to the movie The Graduate if I remember correctly

In one of the classic scenes in American cinema, young Benjamin Braddock is attending a cocktail party celebrating his graduation from college and entry into adult life. His internal reverie on his future is interrupted by Mr. McGuire, who says he has one word of advice for him. After a pregnant pause McGuire says, “Plastics!” Then he beams at the self-evident brilliance of this remark. Benjamin does not know what to say in reply.

A few years ago, I found myself at a cocktail party of business leaders when the C.E.O. of a major company came up to me, beside himself with excitement, and said, “I have the seen the future.” After a long and dramatic pause he delivered his answer: “China!” Like Benjamin, I was at a loss for words.

 

…..

 the second-tallest building in the world — has a 105th-floor observation lounge with a glass floor looking down onto a giant hole in the building. It is spectacular…..

…Our Singapore office costs us $73: about the same as SWFC, but for a much less impressive building. Our Tokyo office is the worst at $96, and it is definitely second-tier. I don’t have an office in midtown Manhattan, but my broker tells me that those average about $88 per square foot per year. So the coolest, newest office space in Shanghai at the SWFC is about the same price as mid-range Singapore, and a bit cheaper than midtown.

We have no plans to open a office in Shanghai. Plus we’re cheap, so we’d never pick that building. However, I find it interesting that despite our frugal approach, we already pay 26 percent higher than SWFC in at least one place. Of course, all this proves is a rediscovery of the old real estate maxim: location, location, location.

If somebody says “this can’t last!” and predicts that the bubble will burst, they may be wrong for a while before they are right. What if they are wrong every year for nine years, and then it comes true in the tenth? How do you count that? Is that 100 percent success in predicting that it was a bubble or 90 percent failure because they missed it so many years?

It is a difficult question, because both answers have some merit. On one hand, pessimism and cynicism are almost too easy. The prediction “this won’t end well” has very little predictive value without a time scale attached, because eventually there are bound to be both good and bad events. It’s a bit like the line from the Bible that says, “There will be wars, and rumors of wars.” Well O.K., but don’t expect me to be all that impressed when the prediction comes true. It’s just too easy.

It’s a great post, I think you are most likely also going to like his Beijing Review here.

Filed under: China Real Estate, General News, Shanghai Real Estate News | , , |No Comments

Stats, Stats, Stats

Lot’s of news out there these days, and since the global crisis is effecting our market too now (expats staying home, bars closed, shops closing everywhere) I think it will be fun (or better depressing) to look at some stats.

Random order, no hierarchy.
Shanghai’s housing prices have taken a significant dip in early ‘09:

Shanghai’s sold square meterage is at a three year low, prices are still way higher than at the time, but inventory does not move.

 

Remember that the RMB is still pegged to the US Dollar, and unfortunately for us, the housing market here is highly depending on currency hedges.
Though the RMB/USD appears stabil at the moment, I believe the bailout will dissolve any resistance left in a few month.
The Shanghai Real Estate Market, like it or not, needs a strong Dollar, or at least Euro, to keep the current levels of rentals.
And more important, enable homebuyers and investors from abroad to pay back their credit here. 

US Treasury:
Looks like there is a downwards trend coming, and I really don’t think china still believes that’s the safest place to put their money.
Who would, right now, in their right state of mind lend the US Government money at 30yrs for 2.2%?
Check here to understand the compound interest behind the first part of the chart.

  a
US Dollar movement and trade volume 

Filed under: Currency, General News, International News, Trends | , , , |No Comments

Sales up, but prices way, way down.

Aiya! 
Is what most landlords, and agents are thinking these days.
A conversation during a pokergame (chinese poker, somewhat different) last week revealed to me what many were actually thinking.

Why the hell does this U.S. Financial thingy affect us so bad?

I think an answer to this actually requires more insight and general knowledge about the economic  links between the countries than I can offer.
So I will resist the tempation in trying so here.

..but! I can give you some hints that i got yesterday…. 

Further down the poker conversation, I found out that many of the big companies actually had a fantastic November.
Dooioo beating them all with more than a hundred luxury real estate sales. 21st Century, and Hope all did well too. 

Very revealing to me was that my friend at Dooioo actually told me that all of the sales were real bargains, and somehow almost everyone of the sellers actually was either a foreigner with loan, overseas chinese with a loan, or a chinese working overseas with loan.
All of them sold way under price (sometimes 30% off), and usually jumped on the first offer they got.

It just shows how interlinked markets worldwide are right now, and america’s worst bear market since the great depression (see chart from barry ritholtz blog here), or potentially the worst ever is getting under the skins off landlords on this side of the pacific too.

And with no end insight, i’m sure I’ll be blogging about more.

If you remember one of the earlier posts this summer I actually pointed out that there are units in one Park Avenue available at 35 and one even at 32k a square meter, which was roughly 25% of it’s spring prices.
Everybody thought that’s it, how much further could it go?
Now there is a unit available selling at just 28′000.

It’s a drastic image, and it’s the same in many other compounds where there is a lot of foreign ownership.

Filed under: China Real Estate, Developements, General News, Market News | , , , , |1 Comment

City to offer “citizenships” to property buyers?

An interesting article was published on the Shanghai Focus Website on Friday.
It is suggesting the the local government is considering reviving the ‘97/98 policy of offering Shanghainese “Citizenships” to affluent property buyers in the City.

The policie’s goal is to attract buyers from other provinces to the city, bringing both, capital and talent to Shanghai.

If there will be action and a similar policy put into place it is not yet clear what regulations there will be for the properties and individuals qualifying.
Quite possible that there will be capital limitations and requirements of a certain educational background.

The policy did actually work, and housing trippled within four years after the economic collapse of asian markets in 1997.
In 1997 the total residential area sold was 6.9 Million square meters, in 98 the total was up to nearly 12 Million square meters and in 2001 it already hit 17.8 Million square meters.

A popular chinese finance portal conducted a survey of recent buyers and found that about 46% said their number one incentive to buy Shanghai Real estate was to obtain the “citizenship, or grean card” the city was offering.

The article itself and many comments on the site are very optimistic how something like this could actually work to curb the transaction volume which has been close to nothing recently.

Funny, amidst the current financial crisis, and failed attempts to rescue the credit markets you would think that a few people could say that artificially keeping prices inflated in a downturn may only make matters worse in the future.

Filed under: China Real Estate, General News, Market News, Rumors, Shanghai Real Estate News | , , , |No Comments

City of San Francisco opens business exchange office in Shanghai

ChinaSF, an office of the City of San Francisco whose goal is to help chinese companies move to San Francisco and the other way around has opened it’s office in Shanghai’s flashy Xintiandi area.

Gavin Newsom, the Mayor of San Francisco offically launched the Office with Vincent H. S. Lo who is chairman of Shui On Land (developer of Xintiandi, and the popular Lakeville properties) wednesday.

Newsom also used the occasion to announce a successful deal through ChinaSF that will bring Trina Solar and China Daily to the californian City.

“San Francisco wants to be the premier Gateway for chinese Companies to the U.S.” the mayor said. 
It sort of seems logic to open an office to Shanghai, China’s Gateway to the west.

San Francisco is the second city to launch an co-operative office after Chicago started a similar fundation last year.

Filed under: China Real Estate, General News, International News | , , , , |No Comments

« Previous Entries||Next Entries »