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Tips for tenants to negotiate a deal
July 8, 2010, Thursday
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AN interview with Joanna Tan, general manager of Joanna Real Estate, about the leasing market in Shanghai.
Q: How is the current luxury residential leasing market?
A: Hot, promising and much sought after. The luxury residential leasing market has seen an upward trend with landlords asking for high rentals, being tough during the course of negotiation, especially those landlords with properties in downtown areas and around Expo site areas.
According to the statistics, the Shanghai Rental Property Index climbed to 1,221 points in May, five points higher than in April. Occupancy rates climbed to a historical high, this being the peak season and with this year's Expo a bonus.
The serviced apartment market outperformed other residential sectors with rentals rising by 20 percent per month, and the occupancy rate lifting to 85 percent.
Q: What can this be attributed to?
A: First, it is the peak season for the high-end leasing market since leasing contracts always expire at this time and many multinational corporations are seeking properties for their expat employees.
Second, the Expo is a real boost to the luxury residential leasing market, with so many Expo staff, businessmen and foreign visitors pushing the demand.
This high flow of people has brought new market opportunities, and keen landlords are rallying to convert their properties into short-term leasing for higher rentals up 15 to 50 percent, some even doubling their asking price. Daily-term leasing has also emerged as the need arises. Many companies have expanded their portfolio to add serviced apartments.
Third, the current lackluster sales market has heightened the high-end leasing market demand. Potential home purchasers are adopting a "wait-and-see" sentiment since the central government published a tightened housing policy to curb speculation.
The detailed guidelines have yet to be released by the local watchdog in Shanghai so investors have turned to transitional leasing, which has geared up the rentals. Investors and developers are also seeking shelter by changing strategies for leasing to optimize their portfolios, with the aim to gain stable capital flows, higher returns and larger ROI (return on investment).
Q: What impact does it haveon the tenants?
A: Obviously, higher rentals and less compromises are made with landlords' unyielding attitudes, since it is a landlord's market. Releasing with the same housing budget is hard to negotiate and intending tenants will have to make quick decisions once they are comparatively satisfied with a property for it will be snapped up by others in a blink of an eye.
Also, it can be a challenge for tenants to develop good relationships with landlords.
Q: So, what advice do you have for your customers?
A: Well, I suggest expats get psyched up, since the market is performing well. Be prepared to accept the same standard apartment as last year with a higher rent since landlords are pinning hopes on higher rates this time.
Start leasing negotiations earlier. In previous years, one to two months advance work in house hunting and negotiations have been normal for many expats. Recently, many have found a property under-negotiation could easily be taken by others, resulting in limited time to proceed to the next round of hunting. Therefore, two to three months' house hunting and negotiation in advance is advisable.
Be flexible. Large developers may be a good choice for their reliable reputation and sound management. But individual landlords can be a good option for they are holding multiple properties in good condition and asking for 20 to 30 percent lower rentals compared with developers.
Longer-term contracts are preferred. Long-term leasing is always a strength in rental negotiations since landlords don't want to bother finding other tenants and risk one month or several months' vacancy. Instead of signing a one-year contract, sign for two or more years. This could challenge your agent's negotiation skills so find a trustworthy and large relocation company which has professional agents.
Q: Any other suggestions for landlords?
A: It's better for landlords to maintain long-term tenants, not follow everyone on the short-term leasing spree. We all know the valley effect, which refers to the depression after a one-time boom. This was seen during the post-Olympic period in Beijing when hundreds of properties were left unoccupied. Who can tell what situation will evolve with the easing of foreign customers? Most of us can't afford the risk of being exposed to a high vacancy rate.
Here, a word for those landlords who are just ending leasing contracts: don't pursue Expo tenants any more. Expo is already underway and potential tenants are sporadic and can't afford too high rentals. Also, the low budget hotels are taking a sector of Expo tenants for the same price and more flexible leasing terms. Judging and weighing the gains and losses, long-term leasing seems to be a better option.
For more information, please check www.joannarealestate.com.cn, or call 5228-5528,5228-6628
Q: How is the current luxury residential leasing market?
A: Hot, promising and much sought after. The luxury residential leasing market has seen an upward trend with landlords asking for high rentals, being tough during the course of negotiation, especially those landlords with properties in downtown areas and around Expo site areas.
According to the statistics, the Shanghai Rental Property Index climbed to 1,221 points in May, five points higher than in April. Occupancy rates climbed to a historical high, this being the peak season and with this year's Expo a bonus.
The serviced apartment market outperformed other residential sectors with rentals rising by 20 percent per month, and the occupancy rate lifting to 85 percent.
Q: What can this be attributed to?
A: First, it is the peak season for the high-end leasing market since leasing contracts always expire at this time and many multinational corporations are seeking properties for their expat employees.
Second, the Expo is a real boost to the luxury residential leasing market, with so many Expo staff, businessmen and foreign visitors pushing the demand.
This high flow of people has brought new market opportunities, and keen landlords are rallying to convert their properties into short-term leasing for higher rentals up 15 to 50 percent, some even doubling their asking price. Daily-term leasing has also emerged as the need arises. Many companies have expanded their portfolio to add serviced apartments.
Third, the current lackluster sales market has heightened the high-end leasing market demand. Potential home purchasers are adopting a "wait-and-see" sentiment since the central government published a tightened housing policy to curb speculation.
The detailed guidelines have yet to be released by the local watchdog in Shanghai so investors have turned to transitional leasing, which has geared up the rentals. Investors and developers are also seeking shelter by changing strategies for leasing to optimize their portfolios, with the aim to gain stable capital flows, higher returns and larger ROI (return on investment).
Q: What impact does it haveon the tenants?
A: Obviously, higher rentals and less compromises are made with landlords' unyielding attitudes, since it is a landlord's market. Releasing with the same housing budget is hard to negotiate and intending tenants will have to make quick decisions once they are comparatively satisfied with a property for it will be snapped up by others in a blink of an eye.
Also, it can be a challenge for tenants to develop good relationships with landlords.
Q: So, what advice do you have for your customers?
A: Well, I suggest expats get psyched up, since the market is performing well. Be prepared to accept the same standard apartment as last year with a higher rent since landlords are pinning hopes on higher rates this time.
Start leasing negotiations earlier. In previous years, one to two months advance work in house hunting and negotiations have been normal for many expats. Recently, many have found a property under-negotiation could easily be taken by others, resulting in limited time to proceed to the next round of hunting. Therefore, two to three months' house hunting and negotiation in advance is advisable.
Be flexible. Large developers may be a good choice for their reliable reputation and sound management. But individual landlords can be a good option for they are holding multiple properties in good condition and asking for 20 to 30 percent lower rentals compared with developers.
Longer-term contracts are preferred. Long-term leasing is always a strength in rental negotiations since landlords don't want to bother finding other tenants and risk one month or several months' vacancy. Instead of signing a one-year contract, sign for two or more years. This could challenge your agent's negotiation skills so find a trustworthy and large relocation company which has professional agents.
Q: Any other suggestions for landlords?
A: It's better for landlords to maintain long-term tenants, not follow everyone on the short-term leasing spree. We all know the valley effect, which refers to the depression after a one-time boom. This was seen during the post-Olympic period in Beijing when hundreds of properties were left unoccupied. Who can tell what situation will evolve with the easing of foreign customers? Most of us can't afford the risk of being exposed to a high vacancy rate.
Here, a word for those landlords who are just ending leasing contracts: don't pursue Expo tenants any more. Expo is already underway and potential tenants are sporadic and can't afford too high rentals. Also, the low budget hotels are taking a sector of Expo tenants for the same price and more flexible leasing terms. Judging and weighing the gains and losses, long-term leasing seems to be a better option.
For more information, please check www.joannarealestate.com.cn, or call 5228-5528,5228-6628
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