Posts Tagged ‘real estate’

A Softer Market

Thursday, February 19th, 2009

Cakes and fruit baskets are always welcome at our office, but less so when it’s an enticement. Since December last year sales teams from Beijing’s top-tier serviced apartments have been bearing gifts when dropping by to say “Hello”. Always the first to react,  rents at  Embassy House and Ascott have been slashed by 15-20%. They’re also offering more flexible lease terms to maintain occupancy levels. A lower floor 2 bedroom apartment at Embassy House now rents for RMB28,000/month. Compare that to last years’ rent of RMB35,000/month.Individual landlords are following suit with similar drops at apartments such as  Park Avenue and  Central Park. In suburban Shunyi we’re seeing a similar drops in rent levels at  YosemiteRiver Gardenand  Beijing Riviera.With no viable new supply coming online, we expect occupancy to remain high at the main expat residential communities. Landlords at less popular communities, and also at older or poorly renovated properties may face tougher times if they don’t renovate or make large rent adjustments.There’s no doubt that our clients are tightening their belts and on the look out for cost savings. Still, January was an unusually busy month for us. But with the month’s  33% drop in foreign direct investment, we’re cautious about this summer’s expat relocation season.On a side-note, in an effort to stimulate lacklustre sales, the government has lifted the 12-month prior residency requirement for foreigners wanting to buy property in China.

Beijing Residential Rentals - 12 month outlook

Thursday, July 31st, 2008

On the demand side, rents are dependent on foreign investment levels and the knock-on effect of increases in foreign staff. China does not yet appear to have been affected by shaky global sentiment. As for supply, we anticipate a drop in viable new residential developments coming on-line. In suburban Shunyi, where Beijing’s expatriate families live, it’s unlikely that opulent  new developments, ready soon, will appeal to expatriates. Increases in supply will be from landlords renovating older houses. Although there’s an abundance of land in the district, recent developments have been for retail space or commercial projects like the new Beijing Exhibition Centre.

In prime Chaoyang neighbourhoods developers are moving up-scale, choosing to only build luxury properties. Chevalier at Sanyuan Qiao is a typical example. Expatriates seeking new 2 bedroom apartments with rent budgets below RMB15,000/month will need to look further afield as future mid-tier properties will be built to the East and South of the CBD. Despite the added distance, new subway lines will continue to allow an easy commute.

Although the Olympics raised expectations in the Spring amongst some mid-tier landlords, it was only for short-term August rentals. Rents for villa and luxury apartments have always been immune to the Olympic effect. For the coming 12 months we expect rents to remain stable at solid developments like Park Avenue, Central Park and Yosemite. However, with poor occupancy since launch, we anticipate drops in rents at developments less popular with expatriates such as Rits Garden, Cathay View and Orchid Garden.
We do expect a slight surge in replacements in summer 2009 due to corporations having postponed rotations for expatriate families in 2008 because of the games. Note that expatriates whose rent allowances are tied to the dollar may feel the pinch if RMB appreciations continue.

Price increases declining

Friday, April 11th, 2008

Economist 0804This week’s Economist devotes a page to gloomy news on China’s property market. It mentions developers in Shanghai retaining list prices but offering rebates taking up to 10% off. While Shenzhen has seen prices drop by 28%, prices in Beijing remain more robust, but sales have definitely slowed.

An article in mentions a Central Bank survey in 50 Chinese cities showing that only 14.6% plan to buy homes in the next quarter, down 1.3% from the last quarter. The article also notes growing trend of investors choosing to hold and rent out their properties rather than sell. Rents at popular properties have increased by upto 15% over the last year. With the heady days coming to a close, it will be interesting to see how things pan out. Will increased supply slow the rent increases? With slowing capital gains, will landlords prefer steady rental income over flipping?

Retail real estate agents closing outlets

Monday, January 21st, 2008

In the last week we’ve been reading news articles on real estate chains closing retail outlets in major cities such as Shenzhen, Guangzhou, Beijing and Shanghai. In China, agents with a street-side presence deal in mid to low-end housing.

It’s not uncommon to see a row of 5-6 real estate agents on one street, and then another row of them round the corner or across the street. You’ll see both home-grown and foreign brands. Business owners wanting to buy into perceived respectability can join foreign franchises such as Century 21 and Baker Caldwell. Properties are not listed exclusively, so with few exceptions, all real estate agents have access to the same properties.

The two pre-requisites for entering the business are (1) a retail space in an area with a high density of privately owned mid to low-end housing (2) A team of resourceful salesmen

Streets with a row of real estate agents are market places in the truest sense. Some start the day with the rather foreign practice of lining up outside the front door reciting self-encouragement slogans. Signages may be large, but retail spaces barely seat the employees who spend much of the day on the pavement, ready to deal with potential clients. In Shanghai, where business is always at a faster pace, a squad of electric bikes is always on hand to zip out to a property with a potential client. The incentives are strong. Salesmen are typically from the provinces where there’s an abundance of young people willing to give it a go. Basic salary is low or non-existent. In good times, the talented have made fortunes in a market where negligible capital gains taxes encourages flipping. But for every success story, there are many who barely scrape by. Reports mention that some have not been paid commissions due.

The Chairman of Changhui, one of the afflicted chains was quoted by as saying they’d “grown too fast and too big” (source: AP). With such low barriers to entry, it’s not surprising. The signs of over capacity were there. In the last six months, we noticed retail agencies setting up makeshift stands outside subway stations at peak hours in an attempt to reach out to clients.

Beijing vs. Shanghai

Sunday, November 11th, 2007

We often get asked by expatriates, “What’s the difference between living in Beijing and Shanghai?”. Here’s an excerpt from an email sent to a Dutch client who may be relocating from Tokyo. His company gave him the option of moving to either city.
Shanghai is quite different from Beijing. In Beijing all the development is on the east side, with the villas in Shunyi to the northeast. Shanghai’s divided by the Huangpu river. Puxi on one side, newer Pudong on the other. There are 4 main villa clusters (and several smaller ones). Three are on the Puxi side, and one on the Pudong side. Your office is in the Xin Tian Di area on the Puxi side of the city.

The villa area in Pudong is new and quite well planned. The ones in Puxi are similar to those in Beijing. None of the clusters in Shanghai have the same concentration of amenities that Shunyi (in Beijing) has. The area around your office is quite pleasant. There are a number of good apartment options, but being in the city centre, tends to be favoured by singles or couples with toddlers.

During peak hours, the commute between your office and the American School would take an hour while the commute between the American School and the newer Pudong cluster would take at least 90 minutes. Of course, there are international school in all the villa clusters. But in a nut shell, in Shanghai, your choice of housing location is VERY dependent on (a) your school and then (b) your office. In Shanghai it’s more like living in different townships rather than a single city.

As for lifestyle Shanghai is definitely more developed and a better run city. Beijing is catching up, with the Olympic infrastructure being the driving force. For Chinese culture, Beijing is richer. For nightlife and foreign acts, Shanghai is more like Hong Kong. Many Beijing expatriates learn to speak at least rudimentary Chinese within a year. In Shanghai few do as English gets you further - Philippino waiters and maids are common there. Shanghai shopping is definitely superior, expecially in the higher end. But for mountains and outdoor excursions, Beijing has more to offer. It really depends on what your interests are.

One last thing, please budget for Beijing short-term housing to be very expensive in the summer next year due to the Olympics. Expect rents for small serviced homes to be similar or more expensive than for a long term villa. Also, you should book now. When relocating to most cities, it’s normally a good idea to spend 1-2 months in a serviced apartment during which you find a more permanent home. However, in Beijing (and Shanghai) expatriates cluster in a handful of high-occupancy villa communities. The turnaround is over the summer, and by July each year, many of the better homes are leased out. By August you’re left with either poor decor and/or crazy rents (from wealthy landlords who are not price-sensitive). If you’d like to be here for the Olympics, you need to prepare early - either by staying in a serviced apartment, or selecting your permanent home in say, May. If the Olympics is not important, I recommend selecting your home in June and moving in as soon as the games are over.

Hope this helps in your decision making. Do let me know if you have any questions.

Best regards,