Shanghai Property Market

[Boon]

Shanghai and Wuhan are among the top 5 in the World’s Most Dynamic Cities

Jones Lang LaSalle City Momentum Index Identifies the list of dynamic cities

Recognizing that commercial real estate is no longer just a consequence of a city’s success but a driver of it, Jones Lang LaSalle (NYSE: JLL) has identified San Francisco, London, Dubai, Shanghai and Wuhan at the forefront of cities that demonstrate the combination of strong short term socio-economic and commercial real estate momentum and longer term foundations for success. In its new, proprietary City Momentum Index (CMI), Jones Lang LaSalle goes beyond traditional, static economic rankings to delve into the underlying drivers that are the hallmark of highly dynamic cities.

According to Jeremy Kelly, Director, Global Research for Jones Lang LaSalle: “City momentum is about far more than just raw GDP growth. The true foundation of highly dynamic cities emerges from such factors as speed of innovation and creation of cutting-edge businesses along with new building construction, property price movement and investment in real estate from cross-border investors and corporations.

“The new City Momentum Index offers a fresh and uniquely comprehensive perspective that identifies the signals of change and characteristics of city momentum. By focusing on the features of a city that are likely to underpin future performance, the CMI stands apart from the standard historic performance upon which most indices are based. It is such measures of dynamism in infrastructure, connectivity and innovation that we believe will be steering many investment and location decisions in the future, though investors and corporates should note that high momentum can pose both risk and opportunity.”


GLOBAL TOP 20​ ​

1​
San Francisco​

2​
London​

3​
Dubai​

4​
Shanghai​

5​
Wuhan​

6​
New York​

7​
Austin​

8​
Hong Kong​

9​
San Jose​

10​
Singapore​

11​
Shenzhen​

12​
Jakarta​

13​
Beijing​

14​
Chengdu​

15​
Los Angeles​

16​
Tianjin​

17​
Boston​

18​
Seattle​

19​
Tokyo​

20​
Lima​

The cities that top the CMI are characterized by these dynamics:

• Elite cities that wield clear economic might on the global stage, accounting for one-quarter of the world’s direct commercial real estate investment activity from 2012-2013.

o San Francisco (1), London (2), Dubai (3), New York (6), Hong Kong (8), Singapore (10), Los Angeles (15) and Tokyo (19)

• Rapidly urbanizing cities in China that continue to grow with massive city-building programs despite a slowing economy

o Shanghai (4), Wuhan (5), Shenzhen (11), Beijing (13), Chengdu (14) and Tianjin (16)

• Technology-rich cities that took early advantage of technology trends and provide fertile environments for innovation

o San Francisco (1), Austin (7), San Jose (9), Boston (17) and Seattle (18)

• Smaller, innovation-friendly cities that gained rapid momentum to achieve global position

o Austin (7)

• Growth hotspots beyond the BRICs driven by urban consumerism

o Jakarta (12) and Lima (20)

• Resurgent cities gearing up for events in 2020 with renewed vigor

o Tokyo (19) – 2020 Summer Olympics and Dubai (3) – Expo 2020

While Continental European cities are under-represented at the very top of the list and show lower momentum in comparison with emerging cities, several powerful and successful European cities possess the attributes for longer term success as validated by the ongoing high levels of real estate capital inflows. Demonstrating success factors relating to education, innovation, sustainability and transparency, Paris, Berlin and Amsterdam, for example, are distinguished by their strengths in talent and new technologies, while Copenhagen has among the world’s strongest ‘green’ credentials.

The City Momentum Index assesses 111 cities world-wide with a weighted overall score based on 34 short-term and longer term variables.

Short-term socio-economic momentum variables (40 percent of the model) include recent and projected changes in GDP and population, air passenger traffic, corporate headquarter presence and recent levels of foreign direct investment as a proportion of a city’s economy.

Short-term commercial real estate momentum variables (30 percent of the model) include recent and projected percentage changes in office net absorption, office construction, office rents, shopping mall construction and retail rents, direct commercial real estate investment volumes and real estate transparency.

Longer term variables (30 percent of the model) that are likely to determine future economic strength and real estate momentum include high-value incubator indicators such as university presence and educational infrastructure, innovation capability and presence of technology and venture capital firms.

Kelly comments further: “While most indices provide only a static picture of city competitiveness, by taking a unique look at the combination of short-term variables and sustainable long-term characteristics the CMI provides a look into underlying city dynamics, adaptability and real estate market characteristics.”

http://www.joneslanglasalle.com.cn/China...emID=30126

[Boon]

Shanghai Land Sales Drop to Lowest Point in 12 Months as Supply Dwindles

2014/03/27 by Michael Cole

The value of land sold in Shanghai during the month of March dipped to less than RMB 10 billion, the lowest volume since April 2013, as the city appears to be reducing the amount of land made available on the market.

The drop in land made available appears to run counter to recent central government directives to put more supply on the market to help reduce upward pressure on housing prices.

According to figures made available by the local government, a total of 12 land parcels, excluding those designated for public use, have been auctioned so far this month, with total proceeds amounting to RMB 9.84 billion. The city has no further land auctions scheduled for the month.

The figures for March reflect a 12.8 percent drop in revenues compared to February, but a four percent rise compared to the same month last year.

The 12 plots auctioned since February represented 560,000 square metres of land area, which was 23.1 percent less than March 2013, and 20.8 percent less than February. For April, the city government has scheduled auctions for sixteen sites amounting to only 370,000 square metres. If sold at the auction starting prices, the plots would bring in RMB 5.1 billion for the Shanghai government.

Central Government Priorities Local Government Control

Late last month, China’s Ministry of Land and Resources announced that it will prioritise expansion of land available for housing development this year as the Xi administration continues to look for market driven means of controlling home prices.

The ministry made it clear that top priority will be making more land available in the country’s largest cities.

However, while the central government sets policy and targets, the actual sale of land is up to local governments who, because of their dependence on land sales for revenues, may be reluctant to flood the market with an excess of supply. In Shanghai, the government may also face a dwindling supply of available sites for redevelopment as urbanisation continues to spread.

http://www.mingtiandi.com/real-estate/ch...-dwindles/

[Boon]

Sales of luxury homes soar to record

By Cherry Cao | April 4, 2014, Friday

SALES of luxury homes soared to a record in Shanghai in March, with the Pudong New Area taking up nearly half of the total sales across the city, according to latest market data.

The city saw sales of 477 new residential units costing more than 50,000 yuan (US$8,051) per square meter last month, the highest monthly volume registered here, Shanghai Deovolente Realty Co said yesterday.

By area, the purchases of new luxury homes more than tripled from a month earlier to 78,000 square meters.

“Transactions of new luxury properties rebounded for the first time in four months amid an increase in supply, an indication of recovering momentum among seekers of high-end homes,” said Lu Qilin, director of research at Deovolente.

“Noticeably, a Greentown development in Pudong’s Huamu area saw 227 units sold last month, accounting for nearly half of the total sales recorded citywide.”

The homes were sold for an average 62,825 yuan per square meter, down 2.86 percent from February, according to Deovolente data.

Nearly 2,300 units of new luxury homes were released locally last month, a monthly rise of nearly 30 percent.

http://www.shanghaidaily.com/business/re...aily.shtml

[greengiraffe]

http://www.afr.com/p/world/guarding_the_...JdGUZ8FJqO

Guarding the global economy’s biggest risk
PUBLISHED: 05 APR 2014 02:16:00 | UPDATED: 05 APR 2014 05:06:53

Camouflage uniformed security guards stand at the entrance of a New Century Real Estate development with property owners in silent protest in the background in Taizhou, Zhejiang Province in China. Photo: Qilai Shen
ANGUS GRIGG

Security guards, wearing army green, provide the first hint of trouble. An even dozen of them line the stairs leading to a sales office on the fringes of this coastal city in eastern China. It’s a tunnel of camouflage, which prospective property buyers must pass through before entering the main building. And that’s just the outside security detail.

Inside, a further 31 uniformed guards stand stiffly around the perimeter, while 10 bulky men in plain clothes occupy all the available chairs. It’s hardly the ideal environment to buy an apartment in the 23-tower development under construction next door.

But the muscle is not in place to control would-be buyers. It’s been brought in by the developer, New Century Real Estate, to intimidate protesters who have spent the last three weeks picketing the company.

Such a protest, in a country that cherishes the appearance of harmony above all else, is certainly unusual. But even more unusual is the lack of a quick fix, engineered by the local government to paper over any loss of confidence in the property sector and prevent the details becoming public.

For those wanting to better understand China, this is an opportunity.

The messy property dispute, playing out three hours from Shanghai, provides a rare insight into strains in the property industry. It shows that, contrary to popular belief, ­Chinese home buyers are indeed carrying a significant degree of leverage and that in many cases two generations of wealth is required to buy an apartment, even in an outlying city. It’s about the nascent signs of an upset that could derail China’s credit markets and send shock waves through the global economy.

Most of all, the dispute shows that any property correction in China will probably have its genesis in an unknown “fourth-tier” city such as Taizhou, where developers have expanded aggressively with easy credit from state-owned banks.

INVESTORS LOSE EVERYTHING
Guan Enwei, an export sales manager, is in the middle of this shake-out. In the space of just two years, his decision to buy an off-the-plan apartment from New Century has wiped out the life savings of his family. Worse still, if Guan sold tomorrow he would owe the bank money, even though his apartment won’t be completed for 18 months.

Negative equity, usually associated with Ireland or Florida, is a phenomena almost never seen in the 30-year history of private property ownership in China. Guan and the 700 other buyers in the “Noble Garden” development are in this situation because New Century began slashing prices on March 21, in a bid to clear excess stock.

Overnight it cut the price of 300 unsold apartments in their complex by 30 per cent.

“The apartment across the hall from mine is now selling for 600,000 yuan ($105,000) less than I paid,” says Guan. “The developer needs quick money. We think the company is in trouble.”

New Century refused to speak with AFR Weekend in Taizhou and made no comment during a later phone call. Yet for buyers like Guan, the numbers are stark.

He bought his three-bedroom apartment using a 500,000 yuan loan from his father and borrowed the remaining 1.5 million yuan from the bank. But after the developer began slashing prices, his apartment is now worth less than the amount he borrowed from the bank.

“All the savings my father accumulated are now are gone,” Guan says. And he can’t just walk away either. In another quirk of the Chinese system, buyers like Guan pay the full amount on day one, when they agree to buy a property off the plan.

Not only do buyers pay interest on loans while the property is being built, they take on the price risk as well.

“We only agreed to this because the developer promised that any price cut would be passed on to us,” he says.

“They cheated us. That’s why we have no choice but to come here every day and protest.”

INTIMIDATION BY SECURITY GUARDS
After a low-key week of protest by around 100 aggrieved buyers, the security guards in army greens showed up last Sunday. Predictably, the situation turned nasty. The protesters claim two of their members were kicked and beaten by the guards as a series of ­scuffles broke out.

When AFR Weekend visited on Monday the temperature had been lowered, but the tense stand-off remained. At the time of publishing the developer was still refusing to meet the group and the local government was ignoring their pleas to mediate.

Either way, someone is facing a sizeable loss, be it the developer, banks or buyers. The protesters estimate the 700 families who bought into the Noble Garden development in early 2012 are down a combined 300 million yuan. And that’s just one development in a single Chinese city.

And this figure does not reveal the degree of leverage being employed.

To pay up front most buyers use at least 20 per cent of their own money and borrow the balance from other sources. But many buyers told AFR Weekend that part of the 20 per cent component was also borrowed.

Chen Lianfeng, a 46-year-old taxi driver, is among the most highly geared. She used all her savings to fund half the deposit, with the remaining 130,000 yuan borrowed from friends and family. That means she really only has a 10 per cent stake in the apartment, which is now worth significantly less than she has borrowed.

“This price-drop has wiped out 10 years of savings for me,” she says.

LOW DEMAND
In the development next door the situation is even worse. New Century completed 144 luxury villas in October last year, but one owner said just 30 per cent had been sold. “They are offering a 35 per cent discount but there are still no buyers,” said Mr Tao, who would only provide his surname. The steel trader said he paid 8 million yuan for his five-level, 600-square-metre villa and will spend another 4 million yuan fitting out the shell. That’s a 12 million yuan property, which might be worth half this amount if it were put on the market tomorrow. These discounts, which have only ­surfaced this year, look to be the ­beginning of price capitulation in ­provincial cities across China.

“The oversupply in lower-tier cities is very obvious,” says Andy Chang, an associate director at Fitch Ratings in Hong Kong.

“I wouldn’t be surprised to see more and more local developers collapse.”

Yao Wei, an economist at Société Générale, is even more resolute. “Signs are mounting that the housing market in a number of cities is not just cooling but actually cracking,” she wrote in a note to clients.

And Taizhou appears among the worst of them. According to local government figures, the city of 6 million people has 15 million square metres of apartment space under construction.

At the current rate of sales this will take 34 months for buyers to digest – more than five times the national ­average. But even these figures may understate the extent of the supply glut. Reports in the state media say property research firms are coming under pressure to massage the figures.

The Securities Times reported this week that one firm estimated there were 113,000 apartments for sale in the eastern city of Hangzhou. But after government “revisions” this figure was lowered to a more palatable 75,000.

OFFICIAL FIGURES HIDE TRUE STORY
This is the worry for investors – that the true picture is being hidden by the official figures. Equally, the government is trying to give the impression that prices are holding up, to avoid a buyers’ strike.

But this is getting harder by the day, as reports trickle out about widespread discounting in third and fourth-tier ­cities. In Changzhou, north west of Shanghai, there are reports of a price war among developers, who are offering discounts of 36 per cent from December prices.

In a bid to dampen fears of a steep correction, the local government ordered developers to stop using the words “price cut”; the discounts are now known as “huge preferential offers”.

Such price falls are yet to be reported in the official data, which shows ­average prices in 70 cities across China rose by 8.7 per cent in the 12 months to March. This is partly because these surveys are heavily weighted towards the mega first-tier cities like Beijing, Shanghai, Guangzhou and Shenzhen, where prices are up 15 per cent over the last year. All these cities are benefiting from China’s rapid urbanisation, as they offer migrants better job prospects, ­healthcare and education. The likes of Taizhou can’t offer the same prospects or services, yet local governments and property developers have ­positioned them to be part of this urbanisation boom.

“Every local government wants to expand their city to make it a centre for urbanisation,” says Chang. “But this is not always possible, which has lead to an over­supply of housing.”

At this stage Chang does not believe the big national developers will be caught up in the shake-out under way in provincial cities, but he does expect plenty of pain for local developers.

New Century is somewhere in the middle – it is not a big national developer but is far larger than the small local players. It has projects in 25 cities across China, ranging from Lhasa in Tibet, Inner Mongolia and Hainan Island in the South. In Taizhou alone the company has three developments under construction, comprising nearly 5000 apartments and villas.

If its rumoured financial troubles are correct then it would represent a significantly bigger problem than markets have been anticipating.

The Australian Financial Review

BY ANGUS GRIGG
Angus is a China correspondent, based in Shanghai.

[cfa]

Sales of luxury homes soar to record.
By Cherry Cao | April 4, 2014, Friday |

SALES of luxury homes soared to a record in Shanghai in March, with the Pudong New Area taking up nearly half of the total sales across the city, according to latest market data.

The city saw sales of 477 new residential units costing more than 50,000 yuan (US$8,051) per square meter last month, the highest monthly volume registered here, Shanghai Deovolente Realty Co said yesterday.

By area, the purchases of new luxury homes more than tripled from a month earlier to 78,000 square meters.

“Transactions of new luxury properties rebounded for the first time in four months amid an increase in supply, an indication of recovering momentum among seekers of high-end homes,” said Lu Qilin, director of research at Deovolente.

“Noticeably, a Greentown development in Pudong’s Huamu area saw 227 units sold last month, accounting for nearly half of the total sales recorded citywide.”

The homes were sold for an average 62,825 yuan per square meter, down 2.86 percent from February, according to Deovolente data.

Nearly 2,300 units of new luxury homes were released locally last month, a monthly rise of nearly 30 percent.

http://www.shanghaidaily.com/business/re...aily.shtml

[Boon]

http://www.afr.com/p/world/guarding_the_...JdGUZ8FJqO

Guarding the global economy’s biggest risk
PUBLISHED: 05 APR 2014 02:16:00 | UPDATED: 05 APR 2014 05:06:53

Camouflage uniformed security guards stand at the entrance of a New Century Real Estate development with property owners in silent protest in the background in Taizhou, Zhejiang Province in China. Photo: Qilai Shen
ANGUS GRIGG

Security guards, wearing army green, provide the first hint of trouble. An even dozen of them line the stairs leading to a sales office on the fringes of this coastal city in eastern China. It’s a tunnel of camouflage, which prospective property buyers must pass through before entering the main building. And that’s just the outside security detail.

Inside, a further 31 uniformed guards stand stiffly around the perimeter, while 10 bulky men in plain clothes occupy all the available chairs. It’s hardly the ideal environment to buy an apartment in the 23-tower development under construction next door.

But the muscle is not in place to control would-be buyers. It’s been brought in by the developer, New Century Real Estate, to intimidate protesters who have spent the last three weeks picketing the company.

Such a protest, in a country that cherishes the appearance of harmony above all else, is certainly unusual. But even more unusual is the lack of a quick fix, engineered by the local government to paper over any loss of confidence in the property sector and prevent the details becoming public.

For those wanting to better understand China, this is an opportunity.

The messy property dispute, playing out three hours from Shanghai, provides a rare insight into strains in the property industry. It shows that, contrary to popular belief, ­Chinese home buyers are indeed carrying a significant degree of leverage and that in many cases two generations of wealth is required to buy an apartment, even in an outlying city. It’s about the nascent signs of an upset that could derail China’s credit markets and send shock waves through the global economy.

Most of all, the dispute shows that any property correction in China will probably have its genesis in an unknown “fourth-tier” city such as Taizhou, where developers have expanded aggressively with easy credit from state-owned banks.

INVESTORS LOSE EVERYTHING
Guan Enwei, an export sales manager, is in the middle of this shake-out. In the space of just two years, his decision to buy an off-the-plan apartment from New Century has wiped out the life savings of his family. Worse still, if Guan sold tomorrow he would owe the bank money, even though his apartment won’t be completed for 18 months.

Negative equity, usually associated with Ireland or Florida, is a phenomena almost never seen in the 30-year history of private property ownership in China. Guan and the 700 other buyers in the “Noble Garden” development are in this situation because New Century began slashing prices on March 21, in a bid to clear excess stock.

Overnight it cut the price of 300 unsold apartments in their complex by 30 per cent.

“The apartment across the hall from mine is now selling for 600,000 yuan ($105,000) less than I paid,” says Guan. “The developer needs quick money. We think the company is in trouble.”

New Century refused to speak with AFR Weekend in Taizhou and made no comment during a later phone call. Yet for buyers like Guan, the numbers are stark.

He bought his three-bedroom apartment using a 500,000 yuan loan from his father and borrowed the remaining 1.5 million yuan from the bank. But after the developer began slashing prices, his apartment is now worth less than the amount he borrowed from the bank.

“All the savings my father accumulated are now are gone,” Guan says. And he can’t just walk away either. In another quirk of the Chinese system, buyers like Guan pay the full amount on day one, when they agree to buy a property off the plan.

Not only do buyers pay interest on loans while the property is being built, they take on the price risk as well.

“We only agreed to this because the developer promised that any price cut would be passed on to us,” he says.

“They cheated us. That’s why we have no choice but to come here every day and protest.”

INTIMIDATION BY SECURITY GUARDS
After a low-key week of protest by around 100 aggrieved buyers, the security guards in army greens showed up last Sunday. Predictably, the situation turned nasty. The protesters claim two of their members were kicked and beaten by the guards as a series of ­scuffles broke out.

When AFR Weekend visited on Monday the temperature had been lowered, but the tense stand-off remained. At the time of publishing the developer was still refusing to meet the group and the local government was ignoring their pleas to mediate.

Either way, someone is facing a sizeable loss, be it the developer, banks or buyers. The protesters estimate the 700 families who bought into the Noble Garden development in early 2012 are down a combined 300 million yuan. And that’s just one development in a single Chinese city.

And this figure does not reveal the degree of leverage being employed.

To pay up front most buyers use at least 20 per cent of their own money and borrow the balance from other sources. But many buyers told AFR Weekend that part of the 20 per cent component was also borrowed.

Chen Lianfeng, a 46-year-old taxi driver, is among the most highly geared. She used all her savings to fund half the deposit, with the remaining 130,000 yuan borrowed from friends and family. That means she really only has a 10 per cent stake in the apartment, which is now worth significantly less than she has borrowed.

“This price-drop has wiped out 10 years of savings for me,” she says.

LOW DEMAND
In the development next door the situation is even worse. New Century completed 144 luxury villas in October last year, but one owner said just 30 per cent had been sold. “They are offering a 35 per cent discount but there are still no buyers,” said Mr Tao, who would only provide his surname. The steel trader said he paid 8 million yuan for his five-level, 600-square-metre villa and will spend another 4 million yuan fitting out the shell. That’s a 12 million yuan property, which might be worth half this amount if it were put on the market tomorrow. These discounts, which have only ­surfaced this year, look to be the ­beginning of price capitulation in ­provincial cities across China.

“The oversupply in lower-tier cities is very obvious,” says Andy Chang, an associate director at Fitch Ratings in Hong Kong.

“I wouldn’t be surprised to see more and more local developers collapse.”

Yao Wei, an economist at Société Générale, is even more resolute. “Signs are mounting that the housing market in a number of cities is not just cooling but actually cracking,” she wrote in a note to clients.

And Taizhou appears among the worst of them. According to local government figures, the city of 6 million people has 15 million square metres of apartment space under construction.

At the current rate of sales this will take 34 months for buyers to digest – more than five times the national ­average. But even these figures may understate the extent of the supply glut. Reports in the state media say property research firms are coming under pressure to massage the figures.

The Securities Times reported this week that one firm estimated there were 113,000 apartments for sale in the eastern city of Hangzhou. But after government “revisions” this figure was lowered to a more palatable 75,000.

OFFICIAL FIGURES HIDE TRUE STORY
This is the worry for investors – that the true picture is being hidden by the official figures. Equally, the government is trying to give the impression that prices are holding up, to avoid a buyers’ strike.

But this is getting harder by the day, as reports trickle out about widespread discounting in third and fourth-tier ­cities. In Changzhou, north west of Shanghai, there are reports of a price war among developers, who are offering discounts of 36 per cent from December prices.

In a bid to dampen fears of a steep correction, the local government ordered developers to stop using the words “price cut”; the discounts are now known as “huge preferential offers”.

Such price falls are yet to be reported in the official data, which shows ­average prices in 70 cities across China rose by 8.7 per cent in the 12 months to March. This is partly because these surveys are heavily weighted towards the mega first-tier cities like Beijing, Shanghai, Guangzhou and Shenzhen, where prices are up 15 per cent over the last year. All these cities are benefiting from China’s rapid urbanisation, as they offer migrants better job prospects, ­healthcare and education. The likes of Taizhou can’t offer the same prospects or services, yet local governments and property developers have ­positioned them to be part of this urbanisation boom.

“Every local government wants to expand their city to make it a centre for urbanisation,” says Chang. “But this is not always possible, which has lead to an over­supply of housing.”

At this stage Chang does not believe the big national developers will be caught up in the shake-out under way in provincial cities, but he does expect plenty of pain for local developers.

New Century is somewhere in the middle – it is not a big national developer but is far larger than the small local players. It has projects in 25 cities across China, ranging from Lhasa in Tibet, Inner Mongolia and Hainan Island in the South. In Taizhou alone the company has three developments under construction, comprising nearly 5000 apartments and villas.

If its rumoured financial troubles are correct then it would represent a significantly bigger problem than markets have been anticipating.

The Australian Financial Review

BY ANGUS GRIGG
Angus is a China correspondent, based in Shanghai.

Shanghai is a 1st - tier city or Municipality directly under the Central Government.

Taizhou is a 4th - tier city.

They are in a totally different leagues.

[Boon]

Shanghai’s property market subdued in Q1

By Cherry Cao | April 21, 2014, Monday

SHANGHAI’S real estate market delivered a somewhat subdued first quarter, with mixed fortunes for office landlords, eased interest in residential sales, a pause in investment activity and moderate retail rental growth, according to the most recent market data.

Grade A office space

Demand for Grade A office premises diverged across the Huangpu River.

On the west bank, office rents in Puxi’s central business district fell 0.9 percent from the prior quarter to 9 yuan (US$1.45) per square meter per day. On the east bank, rents rose 1.6 percent to 9.60 yuan per square meter in the CBD of the Pudong New Area, according to global property services provider Jones Lang LaSalle.

“In Pudong, strong demand from domestic companies, particularly financial services and energy firms, continued to chase limited available space, pushing vacancy rates down to 3.5 percent — their lowest level since the fourth quarter of 2007,” said Anny Zhang, head of Pudong markets for Jones Lang LaSalle Shanghai. “Steady rental growth is expected to persist throughout the year. Puxi may also benefit if tight supply in Lujiazui forces Pudong demand to spill across the river.”

In Puxi, most rental activity in the first quarter was related to lease renewals. New leases primarily involved companies seeking larger premises to expand their businesses. Media and retail were the most active tenant segments.

Residential housing

Anecdotal news of price cuts in several less congested cities in China, coupled with tighter credit and government austerity measures, deflated the enthusiasm of prospective homebuyers and led to a drop in sales activity in the first three months.

Purchases of new homes, excluding government-subsidized affordable housing, dropped 44 percent from the previous quarter to about 2.1 million square meters, a 33 percent drop from the same period a year earlier, global real estate advisor Savills said.

Home prices, however, climbed 2.5 percent from the previous quarter to 25,700 yuan (US$4,145) per square meter, a 10.6 percent rise year on year.

“Tighter credit and increasing market uncertainty have pushed some homebuyers to the sidelines until market directions become clearer,” said James Macdonald, head of research at Savills China. “Stricter mortgage conditions are expected to reduce some demand, while the absence of house price targets this year will give local governments greater freedom to introduce more differentiated administrative measures.”

Property investment

Major real estate investment activity slowed in Shanghai in the first quarter following a very active fourth quarter of 2013. The volume of transactions fell, due in part to seasonal factors. Concerns about the strength of the property sector in China also started to impinge on investment decisions.

“That aside, most investors remained confident in the fundamentals of Tier I markets, Shanghai in particular,” said Joe Zhou, head of research for East China operations at Jones Lang LaSalle. “Given the large amount of capital raised but not yet deployed, we believe that transaction volumes will remain strong this year.”

One major investment in the office market and three in hotels were recorded in the first quarter. Calxon Global Tower, a newly developed office property in the Xuhui District, was sold for 1.74 billion yuan to Cura Fund. In the hotel sector, a domestic developer bought the JC Mandarin Hotel on West Nanjing Road for 2.1 billion yuan and announced plans to redevelop the site into office space.

Retail

The retail property market registered moderate growth across the city, amid little change in overall market conditions.

Rents for first-floor shopping mall space in prime areas of the city increased 0.5 percent from the previous quarter to an average 47.4 yuan per square meter per day. Rents in secondary or emerging areas edged up 0.1 percent to an average 18.5 yuan per square meter, Savills data showed.

Vacancy rates at shopping malls in prime locations fell 1 percentage point to 3.1 percent, with malls along Middle Huaihai Road and East Nanjing Road benefiting from the strong emergence of non-fashion retailers.

“Food and beverage and lifestyle retailers made up the majority of large-space leasing as mainstream fashion retailers remained cautious,” said Chester Zhang, associate director of Savills China research. “Rental growth is expected to remain flat to moderate for the remainder of the year, with landlords keen to secure or retain tenants and unwilling to raise rents.”

Landlords will be forced to focus on flexible tenant mixes and digital technologies as growth in online shopping continues to detract from traditional retailing.


http://www.shanghaidaily.com/business/bi...aily.shtml

[Boon]

House prices climb at slower pace

By Cherry Cao | May 2, 2014, Friday | Print Edition

HOUSING prices in China continued to climb for the 23rd straight month in April but at a slower pace, a report released yesterday by China Index Academy showed.

The average price of new homes in 100 cities added 0.1 percent from a month earlier to 11,013 yuan (US$1,776) per square meter, while it rose by 0.38 percent in March, 0.54 percent in February and a 0.63 percent in January, the academy said.

“The growth in home prices, both monthly and annually, has narrowed for the fourth straight month in April, with the number of cities registering price increases falling notably,” the academy said.

“A couple of factors, including policy loosening in some cities and continuing tighter credit at commercial banks, further boosted a ‘wait-and-see’ sentiment among some home seekers resulting in quite sluggish sales across the country.”

Meanwhile, prices in 55 cities nationwide rose from a month ago, down by eight from March. Of these, 11 cities posted gains above 1 percent, down by one from March.

In the 10 largest cities, the average price of a new home rose 0.39 percent to 19,640 yuan per square meter last month, down from a 0.67 percent rise in March.

Of the 10 cities, Nanjing saw the biggest monthly price rise of 0.7 percent and overtook Shanghai which was second with a monthly gain of 0.58 percent, Beijing followed next with a 0.52 percent monthly rise.

Year on year, the price of new homes in the 100 cities jumped 9.06 percent in April, up for the 17th straight month.

In Shanghai, a separate report signaled a slowing market pace.

The purchases of new homes, excluding government-funded affordable housing, fell 11.9 percent monthly to 761,300 square meters in April, or an annual drop of 15.5 percent, Shanghai Uwin Real Estate Information Services Co said yesterday. The average cost of the new homes fell 3.3 percent from March to 25,917 yuan per square meter.

http://www.shanghaidaily.com/business/re...aily.shtml

[greengiraffe]

Modern human race can't take excessive pains... we have seen it all over the world and hence the constant goal post shiftings...

Local governments move to ease home buying restrictions

Xinhua News Agency
742 words
5 May 2014
Xinhua China Money
XHCMON
English
Copyright 2014. Xinhua News Agency. All Rights Reserved
BEIJING -- With the recent cooling down of the red-hot housing market, some Chinese local governments have eased their grip on home purchase restrictions set years ago that were aimed at curbing the property price surge.

Nanning, the capital city of south China's Guangxi Zhuang Autonomous Region, announced last week that residents of five neighboring smaller cities in the Beibu Gulf Economic Zone can now enjoy the same right as Nanning dwellers to buy homes in the capital.

Previously non-locals needed to present documents of paying local income taxes for at least one year to become eligible for buying homes in Nanning, a restriction imposed since 2011 to discourage speculative investment in the property market.

Home prices began to rise steeply since the second half of 2009, partly fueled by record bank lending. The soaring prices spurred complaints from ordinary Chinese as well as fears of a housing bubble.

Governments at all levels had taken a string of measures since 2010 to regulate the runaway market. Many cities including Beijing, Shenzhen and Nanning set restrictions on home purchases including higher down payment ratios and imposing caps on the number of apartments a family can buy.

These measures have taken effect as the world's second largest economy grows at a milder pace.

The recent property market slowdown has also affected Nanning. Transactions of newly-built homes in the city rose 10.6% in the first quarter year on year. But the growth rate sharply decelerated from the 38.8% in the first quarter of 2013, local government data showed.

Nationwide the total area of property sold in the first quarter edged down 3.8% year on year, and combined sales revenue went down 5.2% year on year, National Bureau of Statistics (NBS) figures revealed.

The slower property investment pace was deemed as a major drag on China's fixed asset spending in the first quarter, which in turn weighed on broader economic growth that dipped to 7.4% during the period.

Real estate investment accounted for 13.6% of the nation's gross domestic product (GDP) growth in 2013, NBS figures showed.

Nanning is not the only Chinese city to loosen its property market control in the past week.

Wuxi, a third-tier city in east China's Jiangsu Province, announced that migrant workers who have a stable job in the city and buy a home bigger than 60 square meters from May 1 can get its hukou. The city earlier set a hukou threshold of purchasing a home larger than 70 square meters.

The rigid hukou system, or Chinese household registration, ties access to basic local welfare and public services to one's place of residence.

Moreover, policymakers in Tianjin may mull easing home buying restrictions in its Binhai New Area, a key reform pilot area, to bolster the sagging housing market, local media reported on April 29.

Due to the big role played by land sales and property development in buttressing local governments' fiscal revenue and economic growth, local authorities have the incentives to raise land sale prices and ease home purchase restrictions, especially during a period of price downward pressure. But the central government has not given a green light to loosening home buying limits nationwide.

In metropolitans like Beijing and Tianjin, home prices are growing at a slower pace this year, while many second- and third-tier cities are experiencing property price declines. Lower home prices will lead to dampened property investment enthusiasm and dwindling local government revenue.

Chinese people's expectations about house prices seem to be changing this year and more of them are taking a wait-and-see approach amid reports of new housing projects cutting prices in cities including Hangzhou and Shenzhen, said Chen Huai, a researcher at the Chinese Academy of Social Sciences.

Some cities intended to aid the local property sector to buoy short-term economic growth, but they need to heed the side effects of a property-centered economic growth model as it can lead to high housing inventory or even ghost cities, analysts cautioned.

"The adjustment of the property market will be the biggest challenge for China's economic growth this year," said Wang Xiaoguang, a professor at the Chinese Academy of Governance, adding that local governments should not embark on the old journey of bolstering the property sector to support economic growth. (CMY)

[Boon]

Shanghai

Pudong CBD vacancy rate falls to lowest since 4Q07; Shanghai logistics market boost on the back of a continued recovery in international trade

09 July 2014

According to JLL Second Quarter Property Review

SHANGHAI, 9 July 2014 – Demand from domestic financial services tenants continued to propel the Pudong leasing market, where rents grew 2.5%, and began to contribute to stronger take-up in the Puxi CBD market as well. "As financial reforms move forward and the Shanghai Free Trade Zone (FTZ) regulations become more stream-lined, we are seeing strong demand from domestic asset managers, private equity firms and other financial services looking to expand or set up new offices here." said Anthony Couse, Managing Director for JLL East China. In the logistics market, strong pre-commitment in new non-bonded facilities led to a decline in vacancy, while investor demand for the asset class continues to drive yield compression along with M&A activity. The residential market was subdued in April and May, but saw some improvement in June following China Central bank move supports first-time home buyers. Fast fashion tenants expanded aggressively this quarter and were the main driver for new leasing transactions in the retail sector, although vacancy increased as new supply reached completion. Investment activity improved in the second quarter, primarily driven by demand from domestic owner occupiers in the office sector.

Office

Domestic financial firms remain a driving force in the leasing market. Domestic companies from the financial services sector became increasingly active in the CBD leasing market in 2Q14, particularly in the Pudong submarket. The Shanghai Free Trade Zone (FTZ) and related financial reform initiatives attracted domestic companies looking to register in the FTZ but lease office space in the traditional CBD area. "Many of these companies are interested in the office space in Lujiazui in order to enhance their corporate image," noted Anny Zhang, Head of Pudong Markets for JLL Shanghai. For example, Xinhua Assets and Equity Exchange registered in the FTZ in 2Q14 and leased around 1,000 sqm in SWFC. In the Puxi CBD market, with the exception of retailers, most MNC companies were inactive in the leasing market and preferred to renew space in their current buildings. Meanwhile, as available office space in the Pudong CBD was very limited, more domestic financial service companies turned to Puxi for office space. For example, a domestic financial company leased around 2,100 sqm in Verdant Place in the People's Square area.

Pudong rents outperform due to limited supply; Puxi rents stable. In Pudong, strong demand from domestic companies combined with limited available leasing space caused Grade A rents to continue to increase, rising 2.5% q-o-q to RMB 9.8 per sqm per day. Pudong Premium Grade A rents grew more moderately however, up 0.6% q-o-q. In Puxi, rents remained flat in 2Q14, up slightly by 0.4% q-o-q to RMB 9.0 per sqm per day. Continued new supply intensified competition among Premium Grade A buildings in Puxi, causing Puxi Premium Grade A rents to fall slightly by 0.6% q-o-q.;

Puxi remains a tenant market as new supply continues to reach the market. In the Puxi CBD, two new projects with a total GFA of 104,621 sqm reached completion in 2Q14: Henderson 688 (59,774 sqm) in Jing'an District and 100 Bund Square (44,847 sqm) in Huangpu District. In the decentralised market, two new projects with a total of 94,958 sqm of office space were completed: Greenland The Centre (32,833 sqm) in Xuhui District and Lujiazui Century Financial Plaza Bloc 2 (62,125 sqm) in Pudong District. In contrast, no new projects reached completion in the Pudong CBD and strong demand continued to push down the vacancy rate which fell to 2.4% in 2Q14. This marked the lowest vacancy rate in the Pudong CBD since 4Q07.

Strata-titled Office

Strong buying demand for self-use quickly absorbed new supply launched this quarter. Three projects with a total GFA of 76,234 sqm launched in 2Q14, with around one third of the space already absorbed. Domestic private companies continued to show great interest in purchasing high-end office space for self-use. Sales performance continued to vary by submarket. Submarkets such as Lujiazui Bund, Puxi Bund, and Hongqiao Transportation Hub are especially favoured by buyers, and outperformed in terms of both sales velocity and transaction price. For example, Poly International Center (35,164 sqm) launched this quarter and achieved a sales ratio to 64%. A domestic private bank was the anchor buyer of this project, purchasing around 18,800 sqm for self-use at the price of RMB 90,000 per sqm. Underpinned by strong buying demand, transaction volumes increased by 47% y-o-y and transaction prices rose by 3.6% y-o-y this quarter. We expect domestic private companies will continue to purchase high-end office space for self-use, driving up buying demand. Transaction prices are expected to grow steadily throughout 2014.

Logistics

Non-bonded market vacancy falls due to strong activity in Lingang. In the non-bonded market, leasing demand remained stable in 2Q14, but was still relatively weak compared to the market's peak two years ago. Two new projects reached completion in West Shanghai. GLP delivered its Liantang project in Qingpu District, providing the market with 51,000 sqm of single-storey non-bonded space, 70% of which was pre-leased by appliance-maker Haier. In Songjiang, E-Shang completed a 47,500 sqm double-storey warehouse with a pre-commitment rate of around 30%. The market's overall vacancy rate fell by 1.6 percentage points q-o-q to 9%, thanks to strong take-up in the long-subdued Lingang submarket. For example, some existing tenants in GLP's Lingang project expanded in order to consolidate their Shanghai warehousing capacity. Landlords continue to be cautious, however, as leasing activities have not yet indicated a sustained improvement in demand. In addition, inquiries were reported to be at a similar level to last quarter.

International trade recovery helps to boost demand in the bonded market. In the bonded market, demand improved further in 2Q14 on the back of a continued recovery in international trade. In addition to 3PLs and trading companies, high-tech manufacturers also became active leasing bonded space in Waigaoqiao and Lingang. With no new completions in the quarter, bonded vacancy continued to decline to 9.9%, down 5 percentage points compared to last quarter.

Rental growth slows in non-bonded market but maintains upward trend. With demand remaining stable, non-bonded rents posted slight growth of 0.9% q-o-q to RMB 1.27 per sqm per day in 2Q14 as landlords remained concerned over the sustainability of current demand levels. In the bonded market, rents maintained steady growth to RMB 1.18 per sqm, rising by 3.8% q-o-q, much faster than one year ago just before the announcement of the Shanghai Free Trade Zone. Shanghai is set to introduce a new land policy which will reduce the industrial land-use period from 50 to 20 years. Secondary land prices rose this quarter as developers sought to pick up parcels unaffected by the policy.

A significant trend for Shanghai's future supply of logistics space is the emergence of multi-storey warehouses. Due to elevated land costs and pressure from local governments for larger registered capital for industrial projects, logistics developers acquiring land in Shanghai are becoming less likely to build single-storey projects. For example, five more new projects with over 500,000 sqm of GFA will be finished by the end of 2014, four of which will be built with two or more storeys. As most tenants prefer single-storey projects for their convenience and efficiency, lower effective rents are expected for multi-storey space as landlords offer longer rent free periods to encourage take-up. "While absorption in multi-storey projects is expected to be slower than single-storey projects as tenants adjust to this new type of product, we are optimistic that new space will be fully leased out as many tenants are eager to remain within the Shanghai market, including grocery suppliers and express delivery companies which are extremely time sensitive and focused on the Shanghai market," noted Stuart Ross, Head of Industrial for JLL China.

Residential

Sales fall in April and May, but recovery on the horizon. Buying sentiment in Shanghai's residential market deteriorated further in April and May as home buyers remained on the sidelines amidst policy and price uncertainties. As a result, sales volumes of commodity housing saw a contraction of 17% and 22% m-o-m in April and May, respectively. Coming into June, as the People's Bank of China urged banks to increase mortgage availability, especially for first-time home buyers, market sentiment gradually improved towards the end of June, leading to a mild recovery of 19% in sales volume for June. As such, the total sales volume in 2Q14 recorded 2.1 million sqm, slightly up 1.4% q-o-q, but down 29.0% y-o-y.

High-end prices stabilize in the quarter as buying demand improves. Primary prices for high-end apartments remained largely flat this quarter. Although several projects offered price discounts for a few units, most developers in Shanghai held their prices firm. "Those developers which did offer discounts tended to be in serious need of cash and only offered discounts on certain units in their projects which successfully lured buyers back to their projects," said Joe Zhou, Head of Research for JLL Eastern China. In the secondary market individual sellers became more flexible on their sales prices due to reduced enquires in 2Q14. As a result, average secondary prices flattened out in 2Q14.

In the sales market, The Bound of Bund in Huangpu District, developed by China Resources, launched 106 units in 2Q14, of which 29 were sold during the quarter at an average price of RMB 83,361 per sqm. Meanwhile, West Shore developed by Poly launched 131 units for sale in late June.

Rents stabilize for serviced apartments but performance varies widely by project. In the leasing market, demand picked up moderately in 2Q14 as international schools in Shanghai became active leasing serviced apartments for their faculty members, leading to a pick-up in new leases. With no new completions this quarter, the vacancy rate for serviced apartments fell by 2.8 percentage points to 15.1% in 2Q14. Rental performance diverged among different projects however, as projects facing rising vacancy rates offered more rental discounts this quarter, while others with high occupancy, such as Residences at Kerry Parkside in Pudong District continued to raise their rents. On average, rents for serviced apartments edged up by 0.4% q-o-q in 2Q14.

Retail

Fast Fashion tenants step up their expansion in Shanghai. Fast fashion tenants remained active this quarter setting up new stores. H&M, for example, opened their largest flagship store in Shanghai, occupying 3,500 sqm of space and four storeys in Mosaic (previously known as Plaza 353) on East Nanjing Road. Other fast fashion brands continued to expand in non-core properties. C&A, after leaving Middle Huaihai Road, opened a new 3,000 sqm street shop on North Sichuan Road in Hongkou District. Hollister entered Global Harbour, while American Eagle Outfitters also plans to open a new store in Daning Life Hub. Meanwhile, New Look opened three new stores. "These brands are still very bullish about expansion in China, and will continue to evolve their physical locations in Shanghai in order to maximize exposure and improve their brand image," commented Eugene Tang, Head of Retail for JLL Greater China. F&B tenants continued to expand rapidly across the city. Casual dining chain Salad+, for instance, is opening two new stores in Jing'an and Pudong CBD to meet the needs of office workers.

One core property closes for renovation; two new decentralized projects added. Golden Eagle Department Store (40,000 sqm), located adjacent to CITIC Plaza on West Nanjing Road, closed down all of its shops (except for Gucci) for renovation. Low foot traffic and poor sales performance contributed to this decision. In the non-core market, the River Mall, located at the Expo Site in Pudong, held its grand opening in April and became the largest shopping mall in Shanghai with a total retail GFA of over 330,000 sqm. The project is long and narrow, stretching 1.1 km in total, and includes a rooftop zoo with exotic animals. This quarter, we also added a new retail property in non-core Shanghai - Baoland Plaza (35,470 sqm) - located on the North Bund in Yangpu. The project features supporting retail amenities for local office workers and residents. Anchor tenants include Tesco, Decathlon, and a Physical gym. As of 2Q14, the project is fully occupied.

Rents continue to grow, with strongest performance in the decentralized market. In the core area, open-market ground floor base rents increased 0.8% q-o-q to RMB 51.7 per sqm per day, while non-core rents rose by 3.9% q-o-q to RMB 17.3 per sqm per day. Vacancy increased to 8.3% in the core area, as several anchor tenants vacated their space (including a gym, several weight loss centres, and a restaurant). Vacancy increased to 6.8% in the non-core market due to the higher vacancy level at newly opened properties.

Investment

Investors remain cautious in the second quarter. Fears about the health of the residential sector and a broader slowdown in growth continued to affect sentiment this quarter. While overall investment volumes remained suppressed relative to 2013, the second quarter saw a pick-up in activity from the first quarter with transaction volumes nearly doubling to approximately RMB 11.1 billion. Office market investment was bolstered by owner-occupier demand, especially from domestic financial services companies interested in buying en-bloc for self-use. For example, Ping An acquired two twin towers of Greenland Center Phase 2 for around RMB 4.4 Billion, the largest transaction in Shanghai so far this year. Ping An plans to self-use a large part of the space. For the second consecutive quarter there were no major transactions of retail assets as oversupply and slowing rental growth turn off investors to the sector. Yields continued to widen slightly in both sectors as forecasts for rental growth are trimmed back and sellers adjust their expectations to accommodate more conservative investors.

The logistics sector, in contrast, remained very active in the quarter. Investors continued to pursue direct investment in logistics assets as well as equity stakes in developers. APG, for example, invested USD 650 million in E-Shang, acquiring a 20% stake. E-Shang is one of the major warehouse developers based in Shanghai with projects across a number of cities in China, including Shanghai, Kunshan, Jiaxing and Jinan.

As tradable office and retail assets in the core market remained limited, some large funds are now venturing outside of the core market in Shanghai in order to find ways to deploy their capital. We expect to see more transactions of lower-grade properties in core locations or Grade A properties in non-core locations, and for Shanghai and other Tier 1 cities to remain the focus for most institutional investors in China.

http://www.joneslanglasalle.com.cn/china...rty-review