Archive for Shanghai Real Estate

Shanghai Real Estate news update

Hello 2010!
I hope that all of you, as I had a great ride into the new year, excited to see what 2010 brings, especially in our fantastic Shanghai!

1.32 Billion RMB

…thats what Shanghai’s Gubei Developement Group paid for block B7 and B8 or roughly 33 acres in Shangha’s tourist town Zhujiajiao (or little venice).
146%  price increase, and they beat out 14 other competitors, congratulations!

298100
Is the new record of 2nd hand houses sold during one year in Shanghai. And
it was last year!
320.7 Billion Rmb was the transaction volume of these apartments and houses not including
new developements, also a record.

14.5 Million Rmb

…is what Shanghai’s hero Liu Xiang paid for a 436 sqm Villa in Putuo.  Roughly 33′000 Rmb per square meter.
The olympic gold medalist will surely bring lot’s of attention to one of the hottest Shanghai districts these days.

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Some People won’t sell…

For some people it’s fear, for most it’s joy, the gov. people and developers coming in and offering to buy the property you hold of your hands.
They usually offer a little more until you refuse them a few times and they offer you a huge sum above market price for your pad.

This just happened to an old guy holding a smal 30 square meter one bedroom no kitchen place on Sinan Road that is supposed to become the next Xintiandi.
Negotiating for months the developers have gotten nowhere,
our Shanghainese hero has of yesterday been offered 35 Million Rmb for his 10 square meters of the new Xintiandi.

And I write about him here, because he refused this offer.

350k Rmb per square meters for his old run down “gongfang” that has already been abandoned by most of his neighbors wasn’t enough.
Yesterday, he told us, he’s holding out for 120 Million, and apparently they can offer him this or build the new paulaners around him.

:-)

Now, that would mean Real Estate prices have still some room to go, and that this elder citizen might be shanghai’s most shrewd negotiator in the property game.

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Shanghai Real Estate News – Average price per sqm tops 20k Rmb for the first time

Shanghai Real Estate prices have popped 20,000 the 20,000 Renminbi per square meter for the first time.

In the last week Shanghai’s average price per square meter has hit 20,826 Renminbi per square meter.
A magic mark, having hovered around 19000 Renminbi for a long time this year, and during the 2007 high.
Transaction volume decreased around 25% in the week from rising 5% the week earlier.
Total transaction was 296,000 square meters.

Shanghai Budget Housing launched
Shanghai has opened the run on the first 7200 units of it’s budget housing project.
The Apartment’s located in Jiading, Songjiang and Minhang which offer 70%ownership and cannot be sold wihtin 5 years, will sell for under 5000 Rmb per square meter.
The run on the properties have been big, but the rules are strict;
each applicant must hold a shanghainese houshold certificate for longer than 7 years, and must have lived  in the district of application for at least 5 years (means the registered address from what I understand), the household average maximum income per head is no more than 27600 Rmb, and their assets are not to exceed 70,000 Rmb (per head).
and other criteria…

The properties limits are also set according to each household’s unique setting, say a family with a child younger than 8 years old is to apply for the 61sqm unit.

Developer demands VIP card to see model room
What the Property Community names as the most “NIU” (sort of means “able”) developer in town has asked people interested in buying their product (villa’s) averaged at 17000 Rmb per sqm to first buy a VIP card for 300′000 Rmb. Or they won’t be shown anything in the compound!

The approach seems to bear fruit, the development has already transacted more than 90 Million RMB worth and it hasn’t even officially opened yet!

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Shanghai Property markets continue to climb up, and a new kind of speculator has emerged

Shanghai’s Real Estate Market climbed another 3.9% in October after briefly slowing down in September this year.
Real Estate investment in the city is up 19% for the year and the total transaction volume is up nearly 50% for the year.

Prices also rose 56% year on year and news about an interest hike have not slowed the run on shanghainese properties yet.

With prices escalating into the clouds and new loan rules tied together with the profit taxes introduced in 2005 it’s become a lot harder for speculators to flip properties for profit in the city.

But, as always, Shanghai’s property people found a way. Several people are getting on the boat to place downpayments on hot new luxury properties like the Bund Summit (or Bound on the Bund now).
I read on sh.focus.cn that speculators make the downpayment, pay the broker and wait for somebody to take the bill of their hands for an “extra fee” of 500k to even 1.2 Million Rmb in one case.
The bet seems to pay off, 43 property transactions and counting for the 60 thousand Renminbi per square meter luxury development on Shanghai’s Bund.

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Li Ka Shing ready to sell seasons villa’s after renovation

After holding the seasons villa’s for many years Li Ka Shing’s property arm has started pre-selling seasons villa’s online.

28 of the 141 Villa’s for sale have already been sold (at a 77907 RMB per square meter average) and it seems like they’re just warming up for when the properties are officially rolled out into the market once the renovations finish.

The Online sales report a total of 43 units sold already and Li Ka Shing seems to trade property for cash having not bought another block of land since last year.

Other property investors coming under pressure through the recent record acquisitions will likely keep a close eye on Li.

Is it a smart move?

First of all, would you want to bet against the richest chinese man alive?

For that you have to know what he’s betting on.
Does he think the shanghai market is overheated and is thus, withdrawing funds?

Li has been known for his shrewd timing more than for taking risks.

Or, is he simply doing good business elsewhere?
Hutchinson has immense operations throughout the country with countless developements and affiliations.
More than once were people trying to figure out what they’re up to next only to find out once the deal is done.

Transaction volume was down 5.8% last month but is still multiple times that of last year and supply is still not enough to relax buyers in premium areas just yet.
The market has moved up for the past 10 months and it may do so for a little longer but it seems like the craze created by the massive influx of funds has started to slow down and things are normalizing again.

I know better than calling wolf again, chinese buyers will continue to move for property and a big downturn in the likes of vegas or miami are unlikely but the shanghainese property investors may soon turn to their hold, wait and see mode once again.

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Rentals don’t follow prices up

Shanghai Real Estate has been on a real run alongside the stock index this year.
Though volume has slumped prices hold up pretty well and most recently have hit new highs in many commercial centers such as Xujiahui and Xintiandi.

Why the market moves up can be argued with a lot of reasons.
What has struck me about this “real estate rally” is that there is no correlation with the rental prices.
I’ve looked back in our database back to 2005 and have found that in many cases rents actual move opposite directions.

It could be that the two are not as interconnected as previously thought, and it could also mean that the market is healthier now than before, meaning that lower rents and no rents don’t force landlords to sell the property prematurely.

I compared our database and rents were a lot higher in 2005 then they were in 2004, they also went up in 2006 when the sales market stalled.
Yet in 2007 they were virtually the same.

In 2008 rents went down from 2007, mainly because of the panic resulting from the massive failures on wall street (like bear stearns).
Interestingly the stock market came down in a craze too but sales were stronger.
They’re still moving up until today yet rentals have come down from 2008 but are a little  bit higher than in the beginning of 2009.

I link more of those to emotions, places don’t stay empty, they get rented out, fast, I would even say quicker than before.
But, Companies have more negotiation leverage, the economy is bad, and they pressuring landlords into lower prices now, and it works, mainly because landlords are letting others worry them.

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Shanghai’s new housing supply to dry up within 3 years

There was a real interesting article on Focus Shanghai recently, examining the new house supply in the city and the rapid consume recently.

According to DTZ Shanghai’s housing reserves are still feeding from new developements from 2006 and before.

The Real Estate Industry in China considers Housing Reserves as what is extra after what the market predicts will be consumed in 18 months.
From 2006 until now, Shanghai’s Reserves have been exactly 0 (spelled out zero).

The Research expects the reserves to be 0 and be mostly used up within the next three years.
Much of this the research pushes to foreigners, beginning to actually settle in the city.
After years of renting, affluent migrants, and expats are beginning to see Shanghai as their permanent home, hence the recent buying spree, after the recent slump last year many people started to pick up bargains and prices rose quickly again putting buyers under pressure to avoid ever rising higher prises.

Quite amazing, thinking of oversupply, being in this market. The bearish mood. The news from the western world.

But, also, the recently sold out Wellington Garden (after being a drag for 6 months), raising prices again after quickly lowering them last year.
The Casa Lakeville going like crazy and even the Tomson Riviera (China’s so called most expensive luxury housing) supposedly selling more than 20 units this year already.

Shanghai’s Real Estate market, something truly interesting to watch these days, the total makeover for the expo,
Expats really “settling” here, the new Jing An Temple Skyline, the tallest tower so far (Shanghai Center) and the 22 Line Metro Grid.

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Some interesting number crunching

These are some of the latest official numbers from the Shanghai Real Estate Market.

As of March 30th there were 18771 residential properties for rent in Shanghai, representing a total area of 2.5 Million square meters.

There are 99338 residential properties for sale (11 Million sqm), out of which 47523 qualify as ordinary residential properties (these properties are less expensive and smaller, and they only require a 20% downpayment).

In the last week of March 58 Units of Yanlord Town were sold at an average of 33323 Rmb per square meter in the Huamu Area of Pudong.

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People’s square metro station

Unfortunately I have to admit I don’t take the subway a lot anymore in Shanghai. Only if it’s a short trip and very convinient for me.
What I’ve really been avoiding was people’s square though. It used to be a lot like hell on earth. And switching from line 1 to line 2 or the other way around…. don’t even go there.

Despite my earlier aversion to people’s squares metro station I went there yesterday to get from shanxi rd to nanjing rd west.

First everything was normal, except that there were very little people in the subway during rush hour. I didn’t actually have any trouble breathing. Or turning my head.
That was so so pleasant. But I was really trying to not think about the long hall from line 1 to 2, squeezing through the fences with 1000’s of other people, fighting and falling down the stairs when Shanghai amazed me once more.
The crowds are still there, but in a much larger, open and better organized space. Everything is easy to see. There is no pushing, and there are very high ceilings, it almost feels like it’s straight out of the movie Gattaca.

I walked and stared in awe at a place I’ve been to but have never seen before. It’s 100% changed, and switching lines was almost so pleasant I felt like taking the subway back again.
(It doesn’t matter that I didn’t).

Some pics from Wangjian Shuo’s blog. Guess he’s a more frequent metro traveller for he’s already found it totally changed in january last year. ;-)  

One thing for a strong real estate market is a strong, working infrastructure. This is definitely one of the best and most noticable improvements I’ve seen in the city, for,…well… ever.

I’m certain you’ll read a lot about it during the expo on people’s travel logs, and news sites.

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Rental prices are falling, yes, but where exactly?

Shanghai’s market is a truly funny (ironic) place. 
The Market has followed the global downwards trend lately, more leases are broken by leaving expatriates and those whose companies just can’t afford it anymore.

From my observation the places hit the hardest are the Qingpu, Pudong and Gubei Villa areas.

My theory is that this is mainly related to which industries have been hit the hardest in the probably first contraction of the global economy in about a century.

You have to know the demographics of the expats staying in these areas, they’re mainly families (whose packages tend to be higher) with the working part of the houshold being in the manufacturing industry.
With the global demand for chinese exports diminishing the need for qualified “overseers” is too.

Companies are cutting down the workforce and shutting down factories and quality control centers.

The communities in the villa areas of Qingpu, Gubei and Pudong area built along these factories and therefore are more vulnerable to the kind of downturn we experience at the moment.

Downtown isn’t exactly immune to it, but so far it has weathered the crisis far better than other spots in the city.
There is a lot of people out there looking for deals, and trust me, there area lots.
But these deals tend to be in the smaller property range (usually 1 bedrooms) of which are more available.
There is a strange drought on historic places that are larger than 2 bedrooms and baths.
A lack of supply we didn’t even expect in the best of times.

I think this is because the companies and expatriates working in the industries directly related to chinas internal economy are still doing well.
Or are at least not experiencing a signifacnt fall in sales and profits.

As more chinese who are also affected by the export downturn are starting to cut down on spending and become more frugal this might change though.
You can already tell by the many empty shops in the downtown area that aren’t picked up as fast anymore that people are struggling here too.

Time will tell, and Shrealestate is here to document it ;-)

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