Over the last four decades of observation and investing in and around the Shanghai flat and apartment market, 1 thing is sure. Shanghai apartment market is already past bubble. It’s post-bubble. Or even bubble-proof I would add. Together with the current trend in effect and with land and property holding still going strong as the preferred investment for a growing middle class who don’t have sufficient money to move their investment portfolio in oversea destinations or Hong Kong, domestic housing is the hottest real estate market around this Asian giant.
Shanghai has become the London and San Fransisco of Asia when it comes to leasing flats and other properties. The living cost in Shanghai is continually going up every year. One thing is sure in this game: Real estate agencies are currently doing very well and will be doing so in the future with Shanghai property market.
On Saturday, international property consultancy DTZ/Cushman and Wakefield stated that Shanghai in particular will likely maintain it’s current double-digit growth in transaction volume and value this year and also in the following years aswell. Big international investors are not far behind, although the main buyers are still domestic.
Chinese property investment deals, excluding land sales, are focused to complete $72 billion in Shanghai already in 2017 which means over 20 percent increase from about $55 billion last year. This data is according to the newest report by Wakefield. One growing industry that will be going strong is the growing need for serviced apartments around Pudong financial district since more and more international executives and managers are relocating to this area.
The report also cited low funding costs in China (also at the center economies like Japan) and also yuan depreciation expectations lending to fears that now is the time to enter the market before the currency worth dives. The yuan is currency trading at 6.67, however, consensus estimates have it pushing closer to 7 at the next six months.
The report also cited demand by local insurance firms who need challenging assets to hedge against low yielding fixed income. Insurance companies often invest in bonds. But inflation is around 1 percent in China and when bonds are yielding less than international percent, that does not leave a good deal of growth for insurers who wish to have assets which could cover account holder liabilities. Many U.S. cities have been on the receiving end of China life insurance company real estate investments, including properties in Boston and the famous Waldorf Astoria. The New York City hotel is now owned by the Anbang Insurance of China.
Of the $18 billion worth of property deals national investors sealed 76 percent. Investors are searching for income. Office buildings continue to be the properties, accounting for nearly 60 percent of the total by value this year, sold, Cushman data showed.