Mad About Shanghai

Beijing Office Rentals Now More Expensive than New York

According to Cushman & Wakefield, a global real estate services company, Beijing has overtook New York in office rents. The report was released this month.

Thes are the top 6 countries in terms of having the most expensive office rentals:

1) Hong Kong

2) London

3) Tokyo

4) Moscow

5)Beijing

6) New York

More details can be found here.

Growth Spurt for Jinmao Towers Big Little Brother

It appears that Jinmao Towers younger brother is hitting his growth spurt and will soon dwarf his older brother.

The building is continuing at a frantic pace, and from the view from our window, it appears that it won't be long before the shell of the Shanghai World Financial Center is above that of Shanghai's (and China's) tallest building, the illustrious Jinmao Tower.

The Shanghai World Financial Center, also known as the `giant bottle opener', is set to be the world's tallest building and at 101 storeys high will even cast a shadow over Jinmao Tower's 88 storey splendor.

Due to be completed late 2007, the Shanghai World Financial Center will also remove the title of the world's highest hotel from the Grand Hyatt in Jinmao, although it will be replaced by the Park Hyatt - so at least the title stays in the family. One would also assume that it will also replace the title of the world's highest bar, hotel lobby, etc etc.

See more cool Chinese buildings here.

Shanghai Apartment Prices According to Metro Lines

Now here is an interesting map of Shanghai's Metro lines. It covers all the existing Metro lines and the ones currently under construction in Shanghai, but what makes it unique is the fact that it lists the square meter (sqm) price for apartments in the area.

Click on map to get a bigger image.

So looking at the map, you will see a number near all the Metro stations. This number is the sqm price of apartments in that district near to the Metro.

The closer you are to the Metro station and the closer that Metro station is to South Huangpi Lu station, the higher the price of the apartment (as a general rule).

Our apartment is on line 8 (the blue line) right next to the Laoximen St. station which is currently under construction. It says the sqm price for our area is 23,000RMB. Our apartment is about 158sqm, so that means our apartment would be valued at about 3,634,000RMB (A$605,000 - US$454,000).

Our rent is 6,800RMB per month (A$1,133 - US$850) which would mean that there is a yield of only 2.25% based on this valuation. I guess thats why investors are in it for capital growth and not rental yields - and also why the government is keen to cool property in Shanghai.

Housing affordability in Shanghai will continue to be an issue for many years to come.

Meet Vincent Lo, the Developer of Xintiandi, Shanghai

We went to a cocktail party yesterday evening and   the guest speaker there was Vincent Lo, the developer of Xintiandi in Shanghai.

Mr Lo came to Sydney for Forbes Conference and was invited by ACBC and Hong Kong Economic & Trade Office to give members of these two organisations some insights of his business.

Mr Lo is the Chairman of Shui On Group in Hong Kong.  One of his famous property investment projects is Xintiandi in Shanghai. I'm sure every westerner who has been to Shanghai in the last couple of years has been to Xintiandi. Now Mr Lo is building another Xintiandi inHangzhou; the new development is called "Xihutiandi" which is obviously named after  the beautiful West Lake in Hangzhou.

When talking about how he had picked up the projects such as Xintiandi, Mr Lo said that he always believe his guts regarding a potential development and what also equally important is he always calls a group of experts to go to the potential development site and carry on a thorough investigation so that he understands fully about the market there. He emphasised that his success in property development is mainly due to his thorough due diligence on the site. When he is ready to talk to the local government about his plan, he always has enough reason to convince them.

Another point he made about doing business in China is that you've got to have enough patience and work the way according to the locals. The Chinese locals will never come to your way; you have to follow their rule no matter whatever it is. He gave us a couple of examples about Xintiandi development. One of them is that he only signed a 4-page contract for this billion $$ development! That's the local way; you don't predict everything in your contract; on the contrary, you change according to the current situation. There is an old Chines saying  "Plan is never as fast as the speed of changes." That indicates how flexible the Chinese people are and how ready they are always for the new changes. That's why Chinese contracts have a totally different concept from the western contracts.

The other example Mr Lo gave us is that for the development of Xintiandi, he has moved about 2000 families from the site to relocate them. Now there is only one family still living on the site and refusing to move unless they are paid $4 million for the relocation. The issue has been going for the last two years and still hasn't been solved. Mr Lo said you've got to be patient and settle the issue in the Chinese way. One funny thing he pointed out is that the very family remains on the site doesn't actually  have any title to the land they are living on; the local government doesn't want to vacate them because they want to have a "harmonious" social environment and would never seek violence.

Mr Lo verified the theories of how to do business in China by Mr China. Understanding the local culture and market, being patient and respecting the local people are all gold secrets to a success in terms of doing business in China.

Mr Lo said apart from his  other projects happening in Hangzhou and Chongqing  (the largest city in the world), he is helping building a Silicon Valley in Yangpu District, Shanghai. I'd be interested to go to visit the site when I arrive in Shanghai.

Looking for Accommodation in Shanghai - Continued

I called +86 21 114 which is the phone directory in Shanghai and was told the serviced apartments I was after is not registered with them. I realised that you can't contact these serviced apartments directly, that means,  the only way to inquire or book service apartments are through those real estate agents.

I called Shanghai Pearl Property  whose advertisement for serviced apartments is everywhere. I was told that they don't have any apartment available for budget within US$1000 in Shanghai downtown of Puxi. All the serviced apartments they have got are much more expensive.

Then I went to a couple of real estate agent websites and found out their service charges:

• No charge if your lease is more than a year (the apartment developer pays them commission)
• 1/4 of the monthly rent cost for lease 6-9 months
• 3/4 of the monthly rent cost for lease less than 6 months, more than 3 months
• full amount of monthly rent cost for lease less than 3 months

So if I rent a serviced apartment for US$1000 f or one month, I actually have to pay US$2000! Ridiculous! I can't imagine any one would like this deal.

(The price range for serviced apartment in the downtown area of Puxi is US$1000 - US$5000 for studio, 1 bed - 3 bed. )

I came to some other options such as staying with friends for a few days, hiring an agent to find an apartment for us now before we arrive etc. However, I prefer my  privacy and still like to find the apartment myself to gurantee the quality and satisfaction.

Finally I decided that

1. we can book a hotel for a couple of days;
2. the first couple of days in Shanghai should be just for apartment hunting;
3. as soon as we find the right apartment, we move in.

Generally you can move in straight away whenever you find an apartment you like because they are always empty when they are on the market for rent.  You never inspect an apartment with tenants in it in Shanghai.

I have to admit that I have underestimated the task and of looking for accommodation in Shanghai and also have underestimated the price. Things are always more complicated than on the surface.

Looking for Accommodation in Shanghai

Accommodation arrangement is always a hard part for people moving to a new place or a new country, especially for those who don't know the place well or don't speak the same language.

As I am a Chinese and was living in Shanghai before , plus I had the experience of renting in Shanghai as well, I am never worried about finding a suitable place in Shanghai.  Basically  I decided that we should first  find a serviced apartment in the downtown area and stay there for  a month while we are looking for an apartment ourselves.

Today  I spent some time searching the internet for some serviced apartments. I found generally serviced apartments are quite expensive in Puxi downtown area; those in Pudong are less expensive. I come across a very helpful website shanghaifinder .  I searched serviced apartments in this website and found a few that meet my standards.  They normally provide the detailed info about the apartment such as location, facilities, photos, prices, etc. However only one thing I find a bit frustrating is they don't provide a contact phone number, intead, there is only a online form for you to fill in.  I prefer to pick up the phone and talk to people rather than send in a form which I'm not sure if it will arrive there or if anyone would attend to it or not.

Anyway, I will keep you posted about our accommodation in Shanghai and will provide our first-hand info for you to make your future accommodation hunting in Shanghai as easy as possible.

US$700 Million Investment in China's Real Estate

Macquarie Bank is expected to launch an Asian listed property trust within the next year with a focus on retail assets, after yesterday paying $US93 million (AU$123.4 million) for nine shopping centres in China.

It is expected the new trust will be listed in Singapore but available to Australian investors.

Although the bank declined to give much detail on the China deal, it said the properties were in major shopping precincts and underpinned by long-term leases to a strong mix of tenants.

Macquarie Bank's deal comes as the Simon Property Group, one of the biggest real estate and shopping mall developers in the United States, said that it had formed a partnership with Morgan Stanley and a state-owned Chinese company to develop as many as 12 shopping centres in China.

The companies did not disclose their investment in the centres, all of which would be anchored by Wal-Mart outlets.

Analysts said the projects could cost as much as $US700 million to develop, which would make the deal one of the largest foreign real estate investments ever made in China.

Simon Property and Morgan Stanley are just the latest foreign companies hoping to cash in on China's booming retail and real estate markets.

The retail boom is so feverish that the country is now home to some of the world's most extravagant shopping malls, including a pair of mega malls under construction in Beijing and the southern factory city of Dongguan which will both surpass the West Edmonton Mall in Canada as the world's largest.

Dozens of cities across China have also been building giant residential housing developments in the last few years and many of these developments, which resemble miniature cities, are beginning to attract huge new shopping centres.

Wal-Mart has 47 stores and plans as many as 60 in China by the end of this year. Its first outlet in Shanghai is expected to open later this week.

For Simon Property, one of the world's biggest real estate companies, the investment is its first big move into China.

Tightening Policy in Shanghai's Property Market

Back in June 2003, the China’s Central Government made it very clear that the government intends to restrict the purchase of investment property. Many would say that now in 2005 these policies have brought about a slowing of the rampant.

By April 2004, Four Major Commercial banks and some of the other lending banks had modified their lending criteria and policy, some of the results were:

• A decrease in the loan amounts for the purchase of luxury properties and investment properties as well as shortening the repayment term
• Encouraging the increasing number of middle income families to purchase owner occupied properties
• Carefully evaluate the purchase of luxury properties, Economical Appliance Properties and commercial properties

The Shanghai Government also released corresponding measures to curb the speculation in the property market.

• On April 26th, 2004, the Shanghai government announced a new policy to ban the transaction of unfinished apartments at secondary market. The measure mainly targets speculators, who seek to make big, quick profits.

• In order to improve the market transparency and efficiency, an online housing trading system was introduced. From July 1st 2004, all projects on sale must be approved and have information such as the number of available apartments, sale price and locations, etc. registered with Municipal government’s system.

The current tightening measures mainly resorted to administrative formula, and aimed to cool off the temporary overheating phenomenon in China’s property market in a short term. As the government focused on land and credit tightening, there could be some negative fallout in the market, (e.g., stalled developments, bankruptcies etc.), but generally these measures make sure a stable, healthy, and sustainable development of China’s property development.

Many would say that now in 2005 these policies have brought about a slowing of the rampant growth, and because of the tightening of lending, have also seen some decreases in prices in Shanghai. This will allow many families to catch up with the market and will facilitate an increase in owner occupied residential property purchases. The risk however, is that as investors are moved out of the market that there will be a shortfall in rental properties in the near future. This could likely lead to an increase in rental prices that may force out lower income earners that can not qualify for a loan. A good balance between owner occupied properties and investors for rental properties needs to be sought, forcing investors out of the market will produce negative long term consequences for the long term renter.