Searching For Best Global Real Estates: Shanghai market

posted by: Adam Smith

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Over the last four decades of taking notes and reporting on the Shanghai apartment and housing market, 1 thing is sure. Shanghai property business is already past bubble. It is post-bubble. Or even bubble-proof I would say. With the urbanization trend and growing income still in effect, and with traditional property and land holding the number one place as the favorite investment for the middle class citizens who just don’t have sufficient cash to replicate into further to other countries or Hong Kong, Shanghai housing is the preferred property market.

shanghai rental apartment
Shanghai is Asia’s London and at the same time New York when it comes to leasing or renting real estate properties.  Also, the living cost in Shanghai is going up all the time. One thing is sure – real estate agencies are doing really well also in the near future with Shanghai property market and rising prices.

On Wednesday, international property consultancy DTZ/Cushman & Wakefield gave out a statement that Shanghai specifically will probably maintain double-digit growth in transaction volume and value this and also the next season. The buyers are mainly domestic, but international big investors aren’t far behind.

Real estate investment deals, excluding land sales, are focused to complete $60 billion in Shanghai around 2017, a 25 percent increase from about $48 billion last year, according to a report by Wakefield.  One industry especially stands out from the rest and it is serviced apartments around Pudong district.

The report cited reduced capital costs in China (and at the core markets like Japan) and yuan depreciation expectations lending to worries that today is the time to enter the market before the currency value dives significantly. The yuan is money trading at 6.47, however, consensus estimates have it pushing closer to 7 at the next six months.

The report also cited demand by local insurance corporations who are demanding hard assets to hedge against low yielding fixed income.  Insurance companies tend to invest in bonds. But when international bonds are yielding less than 3% and inflation is around 1% in China, that doesn’t leave a good deal of growth for insurers who wish to have assets which can cover liabilities of the account holders. Many U.S. cities have been on the receiving end of China life insurance company real estate investments, including properties in Boston as well as the famed Waldorf Astoria.  The iconic New York City hotel is now owned by China’s Anbang Insurance.

In Shanghai, Chinese people still play the dominant role in the marketplace.  Of the $18 billion worth of property deals completed in the first six months of the year, national investors sealed 76 percent.

Investors are searching for income from Shanghai apartment market. Office buildings continue to be the properties, accounting for almost 60% of the total by value this year sold, Cushman data revealed.

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