So, I thought about this a long time, because it didn’t make any sense.
I tried to explain, and yet, still, it didn’t make any sense.
Places rent fast these days, even quicker than last year, and there isn’t a lot of desirable properties available, at least in the French Concession.
I guess it’s fear, now for the first time, renters actually are forced to negotiate harder, and have more confidence to do so, Landlords hear bad news all around, and though it may be one of their first visitors that take the place they are willing to accept offers way below last years price.
There are still bidding wars, but they usually start way below and still end up below the last rental.
I think it’s a healthy adjustment, it gets people to move out of several reasons.
Some couldn’t get their current place down to a rent they find fair in the current market condition, and some just found out about the great deals available now.
Now here’s some funny thing, well, something that’s actually quite common in Shanghai, after working for sometime on the fassades for the buildings on Wukang Road between Fuxing and Huashan Road they just ripped them down again to start anew with different stones.
For little more than a year now the XuFang Group, probably Shanghai’s number one Real Estate holder has bought out the residents of the block (except the one’s of the former Caldbeck McGregor Building no 99).
The average price for the garden villas was about 80′000 Rmb per square meter, and the original plan was to combine and renovate and resell it again to affluent buyers one building at a time.
The Plan is to transform Wukang Road to a pedestrian street like Yandang Road is supposed to be in front of Fuxing Park.
It’s a nice idea, and would definitely be a suitable location, being close to the kerry residences, the pinnacle huashan, gascogne and the infamous ferguson lane developement and right by my office on Wuyuan Road.
I’m sure it would get lot’s of traffic from the Center too.
They Started re-doing the outside of the vegetable market too, what I’m asking myself is, will this stay for a pedestrian street?
Not sure, but will post some updates with pictures once the work is done.
on another note, I just got a new place a few days ago and started renovating on sunday.
I will document the process this time because so many of you have mailed and asked us how we do create the best places in Shanghai ;-p.
It’s our biggest project so far, and will take me about 3 months (2 and a half if they’re quick).
here’s a link
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.