Real estate investment in Shanghai: Sophisticated living spaces in the heart of the evolving Chinese city
With a promising economy and predictable growth trends, the Chinese city is drawing foreign investors looking to own luxury residences in the developing country.
Still regarded as a major magnet for foreign investors keen on China, Shanghai promises relatively predictable growth trends and low levels of bureaucratic control. Due to its ability to attract businesses, it will also continue to attract well-heeled tenants that will keep rents stable. For a developing country, Shanghai’s homes are pricey, although following fears of a weakening Yuan, foreign owners have toyed with the idea of selling some of their assets first. For those who have, these homes tend to be bought by local investors instead, meaning that transaction prices have actually held somewhat steady.
Nonetheless, there is also increasing demand for homes outside of the Central Business District (CBD), especially if well-served by transport networks, where demand for rental apartments is growing, leading to various developers looking for opportunities in the outskirts of the city centre. Moreover, as Shanghai’s economy evolves, demand for technological innovation, media services and telecom infrastructure (TMT) – a relatively new sector – have been growing rapidly, driven by the need to add value through manufacturing and improved efficiency. TMT expansion is also driven by the maturing nature of the business environment in Shanghai, which is boosting demand for more sophisticated living spaces in the city.
According to observations by Knight Frank, since the middle of 2015, there has been an increase in foreign residential investments in Shanghai, especially in prime areas. By some estimates, new luxury home sales in Shanghai were up 288% year-on-year in Q1 2016. There are several factors driving sales, including strong economic activity, intense housing demand and higher supply. China is a developing country with huge growth potential in multiple industries, including manufacturing, natural resources and technology. This has helped to drive up property prices, especially in Shanghai, with prices of new homes in China’s second priciest city jumping 20.7% in May 2016 from a year ago according to estimates by research firm China Real Estate Index System. Property-seekers are looking to buy homes in upmarket precincts such as the car-free shopping district of Xintiandi, the upscale suburb of Gubei (home to a large number of Japanese and Korean expatriates), and Pudong.
To prevent a housing bubble, Chinese authorities introduced new property cooling measures in Shanghai last March, which included larger down payments for second homes. Moreover, non-local residents can only buy homes if their income tax and social security documents show that they have lived in Shanghai for more than five consecutive years. They also need to register as a Foreign Invested Enterprise (FIE). The verdict is still out as to whether these restrictions have any impact on wealthy foreign investors who do not necessarily need to take loans from local banks to buy an investment property. Most of the purchases are cash deals, note market observers.
While the sales market is showing signs of overheating, rentals have been more stable, with luxury residential yields averaging between 2% and 3% in Shanghai. Experts warn, however, that ultimately all the land in China is owned by the government, which leases it out to developers for up to 70 years, making it difficult to sell a property or pass it on to the next generation if the lease on the land is expiring. It is also important to understand the property tax expected for such ownership. Taxes are payable at the start (1.2% on 80% of the sales price for self-use or vacant properties, or 12% of the annual rented income if leased out). There is also a 20% capital gains tax on second-hand residential sales. Where applicable, deed taxes of 1% to 3% are also payable.
ON THE MARKET
Another project to consider is Changfeng Residence, a French-themed project boasting 664 stellar residential apartments and facing the 360,000 square meters green heart of Shanghai Changfeng Park along the Suzhou River, both a mere 10 minutes away by foot. The project, developed by GuocoLand, another notable foreign developer, is also strategically located close to major landmarks like the Shanghai Marriott Hotel and MGM Studio Entertainment World. The project also boasts great accessibility with subway lines, ring roads and various bus options.
For more information:
Tel: +86 021 5282 1177
The condominium is a new award-winning project developed by OCT Land Shanghai. Located in Shanghai’s city centre, at 150m tall it is the highest residential building in Puxi and offers stunning views from its luxurious apartments and duplexes. Its unique city skyline perspective is also touted as the only one in the area that includes views of Lujiazui and the Bund, as well as the meeting point of the Yangzi and Suzhou rivers. Sited along Shanxi North Road, Suhe Creek certainly benefits from an advantageous location—Nanjing Road, People’s Square, the Bund and other major city landmarks are just a short walk away. Excellent transportation accessibility is also ensured with three metro lines located in the vicinity.
Designed by Fosters + Partners Architects and Kokaistudios and boasting interiors by ACPV, DIA and Japanese Construction Co, Ltd, all residences bear high-quality finishes by Poggenpohl, Poliform, BLANCO, Villeroy & Boch and Hansgrohe. With two to three-bedroom units ranging from 180 sqm to 300 sqm (approximately 1500 square feet to 3200 square feet), duplex units ranging from 500 sqm to 600 sqm (approximately 5,382 square feet to 6,458 square feet) and villas with a total area ranging from 1,200 sqm to 1,500 sqm (approximately 12,917 square feet to 16,146 square feet), at 55 million to 230 million yuan (approximately USD 8 million to USD 33.4 million), the project also features a large 3,000 sqm (approximately 32,000 square feet) clubhouse fitted with multiple sporting facilities.
For more information:
www.joneslanglasalle.com.cn / Tel: +86 21 6133 5408
This article was first published under Special Reports in Palace 19.