Archive for Trends

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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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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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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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.

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