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busyexpat
Talker
Joined: May 20, 2005
Posts: 101
Location: Hong Kong
Status: Offline
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 Posted:
June 05, 2005 - 03:50 AM |
 
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I've now left Shanghai because I couldn't get things done. If I wanted to do some random things in Shanghai one day, then I would be limited to one, two or three at the most. If I were in say, Hong Kong, I could do 10 random things, I am sure.
An economy is all about getting things done and if you can't get what you need done, well, then you haven't got a well-functioning economy, you haven't got an economy, or you are dead...and real estate prices reflect, or at least should reflect, the health or dis-health of the economy.
China's stockmarket is at a six-year low, and has declined ever since it opened, for good reason. Chinese people in general, are notoriously poor at investment. This is part of the reason so many Chinese people gamble away so much money in China and overseas...they don't have good heads for risks. On top of this, because so much money comes to so many officials so easily, they are just as readily willing to invest money in real estate and stocks, without the risk assessment normally associated with less corrupt regimes. Therefore, the Chinese stock market was overvalued by ignorant purchasers and is seeing its rightful decline. Shanghai real estate will do the same, since some of its sectors have seen some, or a lot of, similar ignorant purchasing.
The lack of media freedom is clearly to blame. If there were freedom of the media in Shanghai and the rest of China...then the message of the *real* life of Shanghai would actually get out to the 1.3 billion Chinese people in China that their beloved commercial center is actually a farce. I like to call the current "Shanghai Dream" situation, a "media bottleneck"....where the fantastical routing of the Chinese peoples' imaginaries is funneled into a few topics allowed into the Chinese media arena...this inevitably creates psychic overvaluation, which by inflection, leads to physical overinvestment. Every Chinese person (as well as foreigners) I have met outside of Shanghai, that has not been to Shanghai for more than a few weeks or not at all, has this fantastic vision of the leading local economy in China and that if they had the opportunity, it would be their dream to work there. |
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busyexpat
Talker
Joined: May 20, 2005
Posts: 101
Location: Hong Kong
Status: Offline
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June 08, 2005 - 10:54 PM |
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| sydney is experiencing the same thing. the sharp rise during olympic brought on by speculators have had a nice ride but it is time for reality. |
I disagree...sydney is a fantastic, multicultural, multifaceted city right by the ocean. Just about all the people are friendly. The streets are clean, there is nature...birds, insects...things are buzzing...it's great. Sydney may have seen some speculation due to the Olympics games, but since I and other people I know love Sydney so much, I (if I had the money) and others would pay the higher prices. It's totally unlike Shanghai, because Shanghai lacks so much in the way of infrastructure and quality of living. |
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Greenmonkey.com.cn |
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tinayang
Reacher
Joined: July 07, 2004
Posts: 200
Status: Offline
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June 08, 2005 - 11:59 PM |
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I agree with your comments about getting things done....usually in top gear I would have loads of things to initiate, progress or complete in a day, whereas here it's hamster on a wheel syndrome just to get 2 or 3 things sorted out At the moment I see it as fun and I still like this place a lot, but I suppose I'll have to lower my expectations as regards what is achievable in a year and extend the time frame by 1 or 2 years! |
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chunki
Barker
Joined: May 13, 2005
Posts: 139
Status: Offline
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June 09, 2005 - 05:35 AM |
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Maybe I'm not wrong about the stock market. The A-shares were up 8 percent yesterday.
Tim
www.chunkichilli.com |
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izanami
PopStar
Joined: Jan 27, 2004
Posts: 1037
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June 12, 2005 - 11:34 PM |
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It's hard to tell the performance of the stockmarket simply from a short time horizon. Besides, with a low base to start off with, an 8% rise is probably rather small in nominal terms. |
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Tell me what you eat, and I will tell you what you are.-- Brillat-Savarin |
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Victorian
Reacher
Joined: May 03, 2004
Posts: 367
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June 13, 2005 - 08:02 PM |
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An article on the subject from HK's SCMP - Monday, June 13, 2005
Shanghai warily prods at its own bubble
One area in which HK's mainland rival has managed to achieve parity is its property prices, we see in the second and final part of his look at competition between the two cities
MARK O'NEILL
In the past few years, Shanghai's flats and offices have become as expensive as those in Hong Kong.
As happened in Hong Kong, the six-year property boom in Shanghai has brought billions of dollars into the city but pushed up land and labour costs so fast that manufacturers, domestic and foreign, are moving out of the city to set up their factories.
While Hong Kong adjusted to the larger costs with higher added-value businesses, the post-boom restructuring has barely started in Shanghai.
Until the late 1990s, Shanghai relied on manufacturing industry and foreign investment for growth. From 1999, it was property development that became the hottest business in town.
Last year, the property sector accounted for 8.4 per cent of the city's gross domestic product, up from 5.2 per cent in 1999.
Tao Dong, chief economist for non-Japan Asia at Credit Suisse First Boston, estimates that property accounted for as much as 19.5 per cent of GDP, if related industries such as steel and electrical appliances were included.
In 2003, the city government earned 21.6 billion yuan from land sales, enough to pay for about 30 per cent of the city's urban development that year.
With so much at stake, it is no surprise that Shanghai is moving cautiously to puncture the property bubble, as ordered by Beijing.
However, it cannot afford to wait too long.
Cities in Jiangsu and Zhejiang provinces are falling over themselves to attract investors, competing with each other to offer land and labour on cheaper terms than does Shanghai. Hong Kong has similarly ambitious neighbours in the Pearl River Delta but they pose less competition because there is a bigger difference in productivity.
But there is no such gap between Shanghai and its rivals in east China, especially Suzhou, which has emerged as its biggest competitor.
It was in 2003 that Suzhou first overtook Shanghai in contracted foreign direct investment, with US$12.5 billion, against US$11.1 billion for Shanghai. Last year, the city attracted US$14.7 billion, again exceeding Shanghai's US$14.1 billion.
Land in Suzhou Industrial Park costs US$20 per square metre, less than 50 per cent of prices in Zhangjiang high-technology park in Pudong. Wages in Shanghai are 30 per cent higher than in Suzhou, which offers investors lower tax privileges.
Suzhou is just 45 minutes by train from Shanghai.
It is easy to see why Infineon Technologies, the world's sixth-biggest semiconductor maker, chose Suzhou in October 2003 as the site for a plant to make a billion chips a year. It is exactly the kind of hi-tech project Shanghai wants.
Another worrying trend is that old customers are also leaving.
In August last year, 3M broke ground on a factory in the Suzhou park, its first manufacturing facility outside Shanghai.
In 2003, Unilever moved its production of household and personal care products from Shanghai to Hefei, capital of Anhui, where the average monthly wage is 600 yuan to 700 yuan, giving it a saving of at least 30 per cent from Shanghai.
Shanghai began to lose its industry in the 1990s as part of the mass redevelopment of the inner city, which involved the demolition of textile and light industry plants and their migration to neighbouring provinces and even as far as Xinjiang in the west.
Light industry's share of industrial output in Shanghai fell from 43.4 per cent in 1997 to 30.3 per cent in 2003 while that of heavy industry - mainly vehicles, steel and petrochemicals - rose from 56.6 per cent to 69.7 per cent.
The city planned to replace these lost factories with hi-tech plants and the service sector, including finance, securities, accounting and logistics.
But this has not happened. Last year, the share of the service sector in Shanghai's GDP fell to 47.9 per cent, down from 48.4 per cent in 2003 and a peak of 51 per cent in 2002. The share of the financial industry fell to 9.96 per cent last year, the same as in 1995, down from 10.1 per cent in 2003 and 15.1 per cent in 2000.
Instead, Shanghai's fast-growing property industry is edging out the growth of others. High costs are making businesses think twice before setting up shop.
It is also paying a price as professionals choose to live in cheaper cities such as Beijing, Shenzhen and Guangzhou and thousands of long-term residents express anger at not being able to afford homes.
The average price of a flat has nearly doubled from 3,326 yuan per square metre in 2000 to 6,385 yuan last year.
Hong Kong experienced a similar surge in the 1990s but it was a largely home-grown bubble. The city's middle class bore the brunt of the downturn when the market collapsed.
The Shanghai property boom may rest on a bubble, but with a bigger speculative element, in the form of money from Taiwan, Hong Kong and overseas - money that could leave abruptly in the event of a yuan revaluation, a downturn in the market or a surge in foreign stock markets. Demand from city residents is insufficient to sustain prices at their current level.
The high prices also carry a heavy risk to banks. At the end of March, outstanding loans by Shanghai banks to individuals to buy homes reached 121.6 billion yuan, an increase of 69 per cent over the same time a year ago, including 12.5 billion yuan in new mortgages in the first quarter of the year, an increase of 55 per cent over the same period last year.
Banks in Hong Kong did not suffer from bank runs, bankruptcies or massive defaults, even though the property market turned sour in the late 1990s. That may not be the case in Shanghai. [b] |
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busyexpat
Talker
Joined: May 20, 2005
Posts: 101
Location: Hong Kong
Status: Offline
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June 14, 2005 - 01:46 AM |
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Izanami is right. Shanghai's stock exchange is much smaller than those in Hong Kong and Tokyo, for example. An 8% rise is as easy as a 20% drop.
Major banking IPOs this year, and further listings of major China public companies in the coming months and years, with tons of new shares up for grabs, WILL have an effect on the property market. This is because funds normally channelled into the property sector will be diverted to purchase these new shares.
I can't say I completely agree with Mark O'Neill's opening statement that Shanghai's property prices are on a par with Hong Kong. Luxury real estate in prime locations in Shanghai averages RMB30km/2, whereas Hong Kong averages RMB60k plus. Regardless, I still think too much of Shanghai is far overvalued and will rightly see much decline.
If we are to view Shanghai as a company, and we try to value that company, then one major aspect of that valuation must based on the skills and ability of its staff members - Shanghai's people. I and others know all too well how shockingly poor real estate agents, police, sales clerks, waitresses and those pesky women on checkout aisles who incessantly point to products when you are trying to browse, treat and relate to customers and people. There are definitely exceptions to the rule of poor Shanghai service, but the important thing is averages.
Shanghai needs to reinvent itself as a respectful city with respectful people...and then market that concept to its population through media programming...and I don't think this is achievable through state planning alone. |
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ttesty
Newbie
Joined: July 10, 2005
Posts: 4
Status: Offline
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July 10, 2005 - 11:51 AM |
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| Post subject: it's helpful to compare |
It would be very helpful to compare Shanghai's average price per square meter to other major world cities ...
How do Shanghai's current "bubble" prices compare to current prices in New York, London, and Tokyo?
Has anyone seen any such comparisons done by authoritative sources?
I'll be looking for this, and will post whatever I find.  |
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ttesty
Newbie
Joined: July 10, 2005
Posts: 4
Status: Offline
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July 10, 2005 - 11:55 AM |
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Busyexpat has given us a starting point for comparison, and one that is a bit more specific.
Let's compare: Luxury real estate in prime locations ...
- Shanghai averages RMB30k m/2,
- Hong Kong averages RMB60k plus.
Does anyone know the relevant average in New York, London or Tokyo? |
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IAmNotYao
Reacher
Joined: June 16, 2005
Posts: 226
Location: Lost
Status: Offline
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July 10, 2005 - 12:43 PM |
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Comparing NYC (for example) with Shanghai is comparing apples to organes. With NYC, the property tax you pay is outrageous on buying a place, plus the standard 6% commission when you sell, and not to mention the $600+ monthly maintenace fee you probably have. For a flipper, Shanghai is probably a better place to flip than the US. Even with the Chinese gov't imposed tax, it's small compared to taxed at ordinary income for properties held less than two years (there are exceptions) in the US. Anyways, I'm pretty new to Shanghai, based on the 40+ apartments I saw to rent, I'm not longer considering renting, even if I only stay for a year. That's my personal choice and investment objective...
| ttesty wrote: |
Busyexpat has given us a starting point for comparison, and one that is a bit more specific.
Let's compare: Luxury real estate in prime locations ...
- Shanghai averages RMB30k m/2,
- Hong Kong averages RMB60k plus.
Does anyone know the relevant average in New York, London or Tokyo? |
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Wasabichez
PopStar
Joined: Dec 05, 2002
Posts: 1225
Location: Shanghai, China
Status: Offline
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July 14, 2005 - 03:01 PM |
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As many local factors (meaning not US or HK or even other provinces' real estate prices.) I can think of to consider a valuation of local prices. I'm sure we all know it is all overpriced significantly so I don't know why some people still think its a good deal here. Maybe the only "good deals" that are stable and I doubt will change significantly are in city center meaning JingAn (near Nanjing Rd.), LuWan, and XuJiaHui (near LuWan).
I dropped by the broker today, he said the prices haven't changed. OK, I knew that was BS so I reworded the question to what are buyers offering and he said 18000 psqm. Still BS because a friend just got some price quotes for 15-18000. Not around 18000 only. Seriously, these brokers have to learn to not just cater to greedy landowners. Just think, you prefer to get more sales due to people who know a good deal, or a couple sales due to dumb people with too much money? |
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lliu316
Reacher
Joined: Jan 04, 2005
Posts: 315
Location: Shanghai
Status: Offline
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July 14, 2005 - 05:13 PM |
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Interesting topic, especially since I am working in the real estate business, developing a project in Pudong. Although our project is a bit different from normal shanghai commercial real estate development, being the marketing director I do keep up with the market update.
Personally I am completely confident in the real estate market in shanghai, the bubbling effect is little if there is any. Here is my take on this:
1. The real estate price is supported by the economic growth.
The amazing speed of China’s economic growth and its stability are two main factors that made China the target of investors from all over the world. Gross Domestic Product has maintain a steady inclined at more than 8-9% annually since 1991, it event peaked more than 14% at 1992. Shanghai’s economical growth is even more dramatic, this year is the 14th year this city maintaining a double-digit GDP growth. Real Estate price is always on the front of any economic growth, its proven case after case in history.
2. The real estate price is supported by geographical location.
Since china started its economical reform changing from planed economy to market economy from 1978, Shanghai played a key spot geographically. Economical growth in China is led by 5 coastal cities, and shanghai not only being the biggest of those five, it played as the Financial Center and Import/Export shipping center. This advantage gives foreign investors, businesses a special interest in Shanghai.
3. The real estate price is supported by income.
Its true that recordable data shows that the average shanghainese’ income is 1300RMB, three concepts you have to consider. First of all the data is taken from those who pays income tax, which does not include the considerable amount people do not pay income tax to all their incomes if any at all. Secondly most of those who do not pay income tax are those who are making the big “bucks”. Combined tax for people making 6000RMB/mo is about 55%, I wouldn’t let the government take 55% of my income (that’s why I get paid over seas in the US instead of here). Thirdly, the huge population means that even a small portion of people can afford expensive real estate properties makes a considerable amount of customers to drive the market.
4. The real estate price is support by foreign investment. People from Hong Kong. Taipei and Singapore put in huge amount of investment into shanghai real estate market in the last 10 years. Compare to real estate price in those cities, shanghai price is DIRET CHEAP, just ask someone from those places they will tell you. They see the potential of economical development in shanghai and believing that tomorrow’s Shanghai is today’s Hong Kong, real estate price is bound to go up more. Plus most of them are taking advantage of the re-evaluating of RMB, which can bring them a huge extra income.
5. The real estate price is supported by the government.
Being one of the biggest economical sectors, the government is not going to let it drop dead. The huge tax income that the government receives from real estate sales drives the government to make policies to stabilize the market. The published new real estate laws and regulations was the product of this purpose. It did slow down the market and made certain section of real estate market to slightly go down, but its only to reinforce the market foundation.
The recent price drop is result of people not sure what these new regulations would do to the market. Its not because the market is going down, the customers are just being more careful of where to invest their money. They have their money set aside to invest in real estate, and that money is not going to go anywhere except the real estate market. Price drop is not from first hand real estate properties, but second hand houses. The individual owners freaked out a bit from the temporary slowing down, and decided to through out their properties at a lost, that’s a purely foolish act.
My speculation is this… The real estate market is going to start to go back up again in about next 3-6 months, some sections will go up faster than others, for example low priced residential properties will be growing much faster than already expensive villas and luxury apartments. So its not a bad time to consider to invest in that section in the up coming months.
My suggestion is… Two kinds of real estate investment is going to be your best bet if you are only buying to invest.
1. Investment Hotels: Basically you buy a property, and sign a “lease-back” contract with the developer to allow a hotel management company to use your property to operate, and in reture you get a fair share of the profit, usually more than 7% of the investment annually. Rules are different with different development, do your home work! In Shanghai, the quota for hotels rooms needed for the 2010 World expo has only finished 37%, huge shortage for them right now, expecially 4-5 stars hotel. Average hotel occupancy in Shanghai is more than 85% anuually, which is considered very high, which also means good profit for this type of investment. One good example for this type of investment property is Rendezvous Hotel on Yanan Lu.
2. 5A class office buildings: the price for office buildings did not go up with the residencial real estate market in the last few years, but its climbing at a steady rate. There is a huge shortage for office buildings right now as well. This type of product is good for relatively long term investment
Cheers! |
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Life is just one crushing defeat after another until you just wish Ned Flanders was dead. |
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dfoo
Post Roaster
Joined: Jan 19, 2005
Posts: 4140
Status: Offline
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July 14, 2005 - 09:09 PM |
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You can travel around Shanghai at night and see that many many of the high rise buildings are mostly empty. Only about 20% of many of the buildings have any lights on. This to me means that either the apartments were not sold (which is unlikely), or they were sold to people who bought them for investment purposes and they are not lived in. These are the people who will be hurt by the new government regulations are they not?
Regards, Matthew |
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JD
Ranter
Joined: May 14, 2003
Posts: 559
Status: Offline
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Nov 14, 2005 - 03:28 PM |
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| busyexpat wrote: |
| 9....the most expensive apartment I've seen was RMB35mil....over 300sqm penthouse triplex, fully-renovated, overlooking the Huangpu River in Pudong.... |
Saw the same article... 1100 sqm i think it said |
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