Over the previous five to six years of observing, reporting and investing in the Shanghai apartment and housing market, only one thing is sure. In my opinion the Shanghai real estate is already gone past bubble. It is post-bubble. Or maybe I could even say it’s bubble-proof. With the urbanization trend and strong economical development still in effect, also with real estate and property holding the preferred investment for a growing middle class Shanghainese that don’t have sufficient cash to replicate into Hong Kong or further afield to other countries, Chinese first tier cities are the only potential real estate market for them.
Shanghai could be the Asia’s London and Los Angeles at the same time when it comes to renting out apartments. Also, the living cost in Shanghai downtown is going up constantly. One thing is certain: Real estate agencies are doing well in the near future with Shanghai property market.
On Thursday morning, the international land consultancy company DTZ/Cushman and Wakefield stated that Shanghai specifically will most likely maintain very high growth in trade volume and value this season and in following year. Big multinational investors aren’t far behind, although the principal buyers are national but that is likely to change soon.
Property investment prices, excluding property sales prices, are concentrated to complete around $75 billion in Shanghai in the year of 2017, a 20 percent increase from about $59 billion where it was during the previous year, according to a report by Wakefield. One industry that is growing rapidly is serviced apartments around Pudong financial district.
The report also mentioned reduced capital costs inside the market of China (also in center markets like Japan) and yuan depreciation expectations committing to worries that today is the time to get into the market before the currency worth dives. The yuan is currency trading in 6.67, however, consensus estimates have it compelling closer to 7 in the subsequent six months.
The report had cited and made a clear demand by local insurance firms who need very challenging assets to hedge against low yielding fixed income. Insurance companies often invest in bonds for this reason. But when global bonds are currently yielding less than 3% and inflation is around 1% in China alone, that doesn’t leave a good room of growth for insurers who need to have assets which could cover account holder liabilities to protect their own interest. Many U.S. cities are on the receiving end of China life insurance company real estate investments, including properties in Boston as well as the famous Waldorf Astoria. The iconic New York City hotel is owned by the Anbang Insurance of China.
In Shanghai, Chinese individuals still play the dominant role in the apartment market. Of the $18 billion worth of land deals completed in the first six months of this year, investors sealed 76 percent.
Investors are searching for income. Office buildings continue to be the properties, accounting for almost 60 percent of the total by value sold this year, Cushman data showed.