Construction and Housing
The Rise and Fall of Shanghai Real Estate
After reaching a peak in 1994, real estate prices (for foreigners) in Shanghai have dropped on average by 25-30 percent over the past couple of years. With the supply of "Grade A" offices and "luxury" flats/villas tripled, occupancy rates in all but a few choice buildings have fallen to less than 40 percent. To stem further decline, the government has imposed a three-year moratorium on new high-end real estate projects from 1995-98. Bearing the brunt of the crash (without occupancy rates as low as 20 percent), Pudong has resorted to a number of special incentives to encourage foreign as well as domestic investment in the new area. Meanwhile, many developers appear to be deliberately slowing down ongoing construction in a bid to cushion falling property prices. This downturn in the property market is good news for most investors who have been paying an arm and a leg for local real estate. It appears that the astronomical prices demanded have had an effect on the nature and level of foreign investment coming to Shanghai. Many investors, especially smaller ones, are opting to move to other cities with relatively more reasonable costs. We expect that property prices will continue to slide for at least a couple of more years before bottoming out Even if prices were to bottom out, they are unlikely to rebound before well into the next century.
American Consulate Shanghai (PRC), 10/17/97
Housing Expansion Needs Foreign Capital
China is aiming to rapidly increase the construction of urban housing, and so has selected the residential housing sector as a new target for economic growth. China constructed nearly 270 million square meters of housing in 1996, and hopes to add at least 240 million square meters per year during the Ninth Fiver-Year Plan period. Such residential construction projects could benefit from overseas investment, according to Construction Minister Hou Jie, as interest shifts away from luxury hotel construction to ordinary residential housing. Overseas investors funneled more than $13 billion into the real estate sector during the Eighth Five-Year Plan (1991-1995), with the proportion of foreign investment in the sector rising from 3.6 % to 15.9% during that time. Foreign investment in real estate is expected to continue growing at a reasonable rate.
China Daily (PRC), 12/30/96
Growth in Water Treatment Spending
In order to improve water and sewage treatment systems, Chinese cities will need more foreign investment, said Hou Jie, minister of construction. China intends to spend $63 billion to $78 billion on public works projects, he said. Foreign loans and state investment are not enough to offset and estimated 30 to 40 percent budget shortfall. Hou hopes to cover the shortfall through direct foreign investment.
China Daily Business Weekly (PRC), 12/22/96
Construction Sector Generating Massive Output
The output value of China's construction sector generated $180.7 billion in 1996, a 13.8 percent rise over 1995. The Minister of Construction, Hou Jie, released the figures yesterday at a national construction meeting in Beijing.
China Economic Information (PRC), 01/16/97
The Increasing Demand for Housing Boosts Industries
Current residential housing falls far short of meeting demand. Policy makers are also aware of the estimate that 35 percent of the country's population will live in the cities by 2000, a significant rise from the current 18 percent. As a result, major residential building programs are taking place throughout the country giving rise to demand for building materials and consumer durables in particular. This presents many new opportunities for both domestic and foreign suppliers. As quality standards rise and builders lean toward foreign brand names, importers and foreign-invested ventures stand to gain. Current statistics reveal that there is 50.3 million square meters of vacant housing nationwide. At the same time tens of thousands of technically homeless people live in cramped or unsafe conditions. The central government wants to remedy the situation with several policy initiatives that are waiting for the approval of the State Council. The purpose is to stimulate residential housing sales by channeling real estate investment to affordable housing projects and to convert through tax incentives and fee waivers, middle to high-end residential complexes into reasonably priced housing. The Confederation of Light Industry believes that families moving into larger homes will be key in increasing demand for household appliances. Foreign building materials suppliers have been successful in providing medium to high-end residential projects in China. Recently, however, importers and foreign invested manufacturers of building materials have discovered that government funded housing projects have had the funds to purchase higher quality building material, which means a growing target market. Since high-end housing has reached saturation, medium to low-end projects have the most potential.
China Economic Review (Hong Kong), 01/01/97
Mainland's Growing Decorative Materials Market
According to sources in the Ministry of Construction, the State Bureau of Building Materials Industry and the China Association of Building Decoration, China's decoration sector's engineering output has increased by 30 percent annually for the last five years. The engineering output value of the industry is expected to reach $12 billion in 1997 and $25 billion by 2000. According to the sources, China's urban areas will have new residential housing with a total floor space of 200 million square meters built annually. Four hundred million people will move into these new residences by 200. If each household spent an average of $1,200, the total decoration fee would reach $4.8 billion annually.
China Economic Information (PRC), 02/24/97
Government Gives Incentives for Home Purchasing
According to Minister of Construction, Hou Jie, the Chinese central government will take new measures to give people the ability to purchase their own home. "Concessions will be made by the central government on housing taxes, by the local governments on charges, by the banks on loan interests and by developers on sales profits," said the Minister at a press conference organized by the fifth session of the Eighth National People's Congress. "With the efforts from the four sides, we will be able to lower the housing price," Hou said. Many families are looking for homes but the 37 million square meters of housing that remain unsold is mainly due to the exorbitant price, the ministry estimates. Hou then announced that 35 major cities will begin to provide mortgage loans this year to applicants who are employed, have a stable income and are credible. New loans will require a 20 percent down payment and are repayable in monthly or annual installments over 10-20 years.
Cbnet (PRC), 03/05/97
Expansion Plans for Housing Projects
The Ministry of Construction hopes that overseas investors will participate in improving China's housing conditions and it will give assurances that there will be an adequate return on investment. Over the next five years, China plans to construct apartments with a total floor space of 1.2 billion square meters in urban areas.
CIEC Economic Brief (PRC), 02/18/97
Beijing's Offices Remain the Priciest in the Nation
According to the CYL China Property Index, office and residential housing rent in Beijing, Shanghai, Guangzhou and Shenzhen have declined a little from their heights of a few years ago. Beijing's offices and residential rates remain the highest with average monthly rents of $39 per square meter for grade-A offices and $38 for quality apartments. Shanghai ranked second with $37 per square meter for office space and $23 for residential housing. Guangzhou follows with $18 and $7 respectively while Shenzhen has the lowest of the four with $13 and $7 per square meter. The average purchasing price for an office in Beijing is $3,400 per square meter, while housing sells for $3,000 per square meter.
The Asian Wall Street Journal (U.S.), 03/19/97
Shanghai Has Just Become Affordable
In the last couple of years, Shanghai has become a changed city. Traffic is less congested and rents have taken a nosedive. According to First Pacific Davies, Shanghai rents have come down to the level of Paris or New York and will be even lower before they stop. Shanghai is at last "a buy" as brokers like to say. It is too bad that most people who came in did so two or three years ago. The monthly rentals in the best buildings have come down significantly from $50-$90 per sq meter to around $30-$40. Grade A office rentals have decreased about 30 percent in just over a year but at the same time the quality of the buildings and the service has improved dramatically. Around 1.6 million square meters of new office space will be available this year which will mean further downward pressure on prices. The main point of all this is that any foreign company making an investment in Shanghai can expect to provide adequate housing for their expat with a secretary and cover the costs with about $2,000 a month.
EIU Business China (U.K.), 03/17/97