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Joanna Real Estate's analysis of the current residential leasing market in Shanghai
September 27, 2011, Tuesday
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THE first half of 2011 witnessed a high-end residential leasing market boom as a result of purchase restrictions and tightened fiscal controls. Our research indicates that the following factors may have influenced this boom:
Economy - The economic fundamentals will sustain the growth of rental and capital values. The increase in Shanghai residents' disposable income and the sustained growth in the local economy will also sustain the rise of the high-end residential leasing market.
Policy - The government published a series of purchase restrictions and tightened fiscal controls. More would-be home buyers turned to the leasing market instead of purchasing homes.
Expat Number - According to our statistics, 50 percent of multinational companies that have cooperated with JRE have all increased their number of expats in Shanghai, about 20 percent of their overall headcount, especially for senior and middle management.
Demand - The large number of expats flooding into Shanghai has impacted the high-end residential leasing demand, and the supply can't meet the demand. Some properties such as the Green Valley, Windson Park, the Vizicaya, and others have just recently come on line but have been rented out to full capacity almost immediately.
Landlords - Given the strict orders and the seasonal demand influx, the Shanghai residential high-end leasing market remained active in the first quarter. Supported by the declining letting and the surging leasing demand, all landlords raised rentals by 5 to 15 percent. As a consequence, rents increased across the broad spectrum by end of the second quarter.
JRE's leasing transaction statistics show that in the second quarter, the rental pricing for luxury apartment, serviced apartment and villas rose by 10.75 percent, 8 percent and 8.7 percent quarter-on-quarter, respectively.
For the subsector, Pudong saw the greatest rise in rental price of about 12.1 percent, followed by Luwan at 11.4 percent, Jing'an at 10 percent, Xuhui at 9.5 percent, Hongqiao & Gubei at 8.5 percent, and lastly Qingpu & Minhang at 7.9 percent.
Market Outlook for Second Half of 2011
The luxury residential market is projected to be upbeat, in line with Shanghai's local economic development and as a result of limited choice on the market. In addition, the latent surge in purchasing appetite, including both investment and owner-occupied housing demand, will be released after the time horizon of the tightening policies, piling up the momentum for property capital value appreciation.
JRE predicts that the leasing demand for Shanghai's luxury residential properties will continue to be active in the second half of 2011. Expansionary activities and the consequent recruitment schemes in many MNCs will provide an impetus for upper level residential accommodation demand for overseas and/or domestic executives of these firms. Backed up by the robust demand for high-end properties, average rent for luxury apartment is projected to rise by 5 to 10 percent.
Joanna Real Estate's Suggestions
Get Prepared in Advance - Due to the hot leasing market, landlords are all increasing their asking rental prices. The price for new leases and especially renewal leases have witnessed the rental rise by a large margin. In this case, JRE will give its clients advanced notice and start the negotiation in advance, which can, to a certain degree, lower the rental.
Quickly Make Your Decision - Once you have visited your ideal house, make your decision quickly in order to prevent your property from being snapped up by others. JRE will minimize the risk as we have long-term relationships with big developers, which can guarantee us to have a lot of property resources on hand. In the case of individual landlords, our property consultants have usually been working with many of them for years, which can help guarantee stronger negotiations and again more resources.
More Willing to Compromise - As currently the supply can't meet the demand prospective, tenants need to be more ready and willing to accept compromises. JRE is always increasing its market research in order to achieve betters terms for our tenants and meet with their requirements. We ensure that the negotiations are transparent so that the prospective tenant may clearly understand what items may block or break the deal.
More Options - Do not only focus on one property and ensure you have several backups. JRE will provide a great number of properties in our Housing Proposal to try and help you achieve this. We are working hard to further expand our property data base above 80,000 listings in Shanghai.
Advanced Visits to Properties - JRE suggest prospective tenants to visit the units at least one but maximum two months in advance, which can make the rental negotiation easier. JRE property consultant will send photos to prospective tenants before the physical visit to save both time and energy.
As MNCs in China continue to increase their service quality requirements brought about by their huge expansion in China, JRE has responded by laying emphasis on the whole service process, from the pre-sale service to the after-sale management. With the aim to be the largest & best relocation service provider in China, JRE will keep step with international standards using our integrated relocation service know-how to help MNCs to achieve a comprehensive out-sourced destination service, while helping individual expats to achieve their cost saving target, thence achieving the highest customer satisfaction overall.
Economy - The economic fundamentals will sustain the growth of rental and capital values. The increase in Shanghai residents' disposable income and the sustained growth in the local economy will also sustain the rise of the high-end residential leasing market.
Policy - The government published a series of purchase restrictions and tightened fiscal controls. More would-be home buyers turned to the leasing market instead of purchasing homes.
Expat Number - According to our statistics, 50 percent of multinational companies that have cooperated with JRE have all increased their number of expats in Shanghai, about 20 percent of their overall headcount, especially for senior and middle management.
Demand - The large number of expats flooding into Shanghai has impacted the high-end residential leasing demand, and the supply can't meet the demand. Some properties such as the Green Valley, Windson Park, the Vizicaya, and others have just recently come on line but have been rented out to full capacity almost immediately.
Landlords - Given the strict orders and the seasonal demand influx, the Shanghai residential high-end leasing market remained active in the first quarter. Supported by the declining letting and the surging leasing demand, all landlords raised rentals by 5 to 15 percent. As a consequence, rents increased across the broad spectrum by end of the second quarter.
JRE's leasing transaction statistics show that in the second quarter, the rental pricing for luxury apartment, serviced apartment and villas rose by 10.75 percent, 8 percent and 8.7 percent quarter-on-quarter, respectively.
For the subsector, Pudong saw the greatest rise in rental price of about 12.1 percent, followed by Luwan at 11.4 percent, Jing'an at 10 percent, Xuhui at 9.5 percent, Hongqiao & Gubei at 8.5 percent, and lastly Qingpu & Minhang at 7.9 percent.
Market Outlook for Second Half of 2011
The luxury residential market is projected to be upbeat, in line with Shanghai's local economic development and as a result of limited choice on the market. In addition, the latent surge in purchasing appetite, including both investment and owner-occupied housing demand, will be released after the time horizon of the tightening policies, piling up the momentum for property capital value appreciation.
JRE predicts that the leasing demand for Shanghai's luxury residential properties will continue to be active in the second half of 2011. Expansionary activities and the consequent recruitment schemes in many MNCs will provide an impetus for upper level residential accommodation demand for overseas and/or domestic executives of these firms. Backed up by the robust demand for high-end properties, average rent for luxury apartment is projected to rise by 5 to 10 percent.
Joanna Real Estate's Suggestions
Get Prepared in Advance - Due to the hot leasing market, landlords are all increasing their asking rental prices. The price for new leases and especially renewal leases have witnessed the rental rise by a large margin. In this case, JRE will give its clients advanced notice and start the negotiation in advance, which can, to a certain degree, lower the rental.
Quickly Make Your Decision - Once you have visited your ideal house, make your decision quickly in order to prevent your property from being snapped up by others. JRE will minimize the risk as we have long-term relationships with big developers, which can guarantee us to have a lot of property resources on hand. In the case of individual landlords, our property consultants have usually been working with many of them for years, which can help guarantee stronger negotiations and again more resources.
More Willing to Compromise - As currently the supply can't meet the demand prospective, tenants need to be more ready and willing to accept compromises. JRE is always increasing its market research in order to achieve betters terms for our tenants and meet with their requirements. We ensure that the negotiations are transparent so that the prospective tenant may clearly understand what items may block or break the deal.
More Options - Do not only focus on one property and ensure you have several backups. JRE will provide a great number of properties in our Housing Proposal to try and help you achieve this. We are working hard to further expand our property data base above 80,000 listings in Shanghai.
Advanced Visits to Properties - JRE suggest prospective tenants to visit the units at least one but maximum two months in advance, which can make the rental negotiation easier. JRE property consultant will send photos to prospective tenants before the physical visit to save both time and energy.
As MNCs in China continue to increase their service quality requirements brought about by their huge expansion in China, JRE has responded by laying emphasis on the whole service process, from the pre-sale service to the after-sale management. With the aim to be the largest & best relocation service provider in China, JRE will keep step with international standards using our integrated relocation service know-how to help MNCs to achieve a comprehensive out-sourced destination service, while helping individual expats to achieve their cost saving target, thence achieving the highest customer satisfaction overall.
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