Archive for Shanghai Rental Market

Eh, I think I got the handle of it, high demand but dropping prices

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.

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Prices are coming down, not only sales, rentals too!

Shanghai Real Estate prices are coming down.
As the financial markets continue their downward spiral worldwide it seems like Shanghai’s Real Estate Markets are following.

As China’s latest GDP growth report indicated the country is too large to be immune from economic events worldwide.
Although Retail Sales have picked up, GDP growth has slowed to 9% for the quarter.

I have already warned that there will be more and more desperate sellers popping up in Shanghai too that will want to liquidate their property assets into vital cash. 
That was a foreseeable event as the city will also get it’s share of export related property sales.

But there is another interesting trend that wasn’t so obvious, a large number of new rental listings have popped up around the Shanghai in recent months.
Some large Agencies like Centaline are even demanding new listers to drop prices by 10% or they want take the listing as supply is starting to outweigh demand.

Why is this happening?

I believe it is related to the chinese investors mind. If they can avoid it, chinese will never sell on a loss, I’ve seen this with many people around me.
Even as stocks fell sharply, day after day and there was no end in sight for the coming months most people that could afford it refused to sell their shares at a loss.
“I’ll just hold on until they recover. I don’t need the cash right now. You can’tsell on a loss.”
These are just some examples of the explanations people have given me.

It seems like that the real estate market is no exception in the rule.

There are still plenty of investors out there that have lot’s of cash and are not in the immediate need of selling.
But because the common opinion out here is that the market isn’t going to recover within the next two years, landlords are looking to rent their properties out now.

Most landlords here don’t like to rent their Real Estate, many feel like tenants will decrease the value of the apartment over time by wearing it down, damaging it, etc.
Because prices are high, and the general return on investment by rental was ridiculously low that actually made some sense as just a little appreciation in the property was enough to offset the loss in rental by multiple times.

Now prices are coming down, and even these super cash rich (large ego) individuals are starting to think that a little extra income on the side will be nice because of the growing uncertainty, especially in a market like this.
Sure many of them are also opportunists, and because cash is king the accumulated rental will be helpful in taking advantage of oversold, cheap assets.

Up until now, most of these new listings are in the low to medium rental segment. (4000 to 12000 Renminbi).

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