On the Lookout For Real Estate: Get a flat in Shanghai

apartment shanghaiOver the previous five years of observing and reporting on the apartment Shanghai and housing market, 1 thing is certain. Shanghai real estate is beyond bubble. It is post-bubble. Or maybe bubble-proof. Together with the trend in effect, and with land and real estate holding the favorite investment for a middle class who don’t have sufficient money to shuffle into farther afield or Hong Kong, China home is the property market.

The living cost in Shanghai is going up. One thing is sure — real estate agencies are doing really well in the future with Shanghai apartment market and lease business.

On Wednesday, global property consultancy DTZ/Cushman and Wakefield said that Shanghai specifically will likely maintain double-digit growth in trade volume and value this year. The buyers are national, but investors aren’t far behind.

Property investment deals, excluding land sales, are focused to complete $70 billion in Shanghai at 2017, a 20% increase from about $58 billion last year, according to a report by Wakefield.  One sector that is growing is need for serviced apartments around Pudong district.

The report mentioned low capital costs in China (and at the core economies like Japan) and also yuan depreciation expectations committing to fears that now is the time to get into the market before the money worth dives. The yuan is money trading in 6.67, but consensus estimates have it compelling closer to 7 at the next six months.

The report also cited need by local insurance companies who need hard assets to hedge against low yielding fixed income.  Insurance companies often invest in bonds. But inflation is about 1% in China and when international bonds are currently yielding less than 3%, that does not leave a good deal of growth for insurers who need to have assets that can cover account holder liabilities. Many U.S. cities are 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 owned by China’s Anbang Insurance.

Of the $18 billion worth of land deals 76 percent were sealed by investors.
Investors are looking for income. Office buildings continue to be the properties, accounting for almost 60% of the total by value this season, sold, Cushman data revealed.