In Shanghai, the office market and the residential housing market have a distorted phenomenon of “fire and ice”: on the one hand, new residential housing and second-hand housing, with a shortage of supply, increased credit allocation and investors’ mentality of “buying up but not buying down”, the turnover has reached a 4-year high; on the other hand, the vacancy rate of office buildings has hit a 10-year high and continues to march towards a 30% vacancy rate, highlighting the serious imbalance between supply and demand in the city’s real estate industry.
According to data from the E-House Real Estate Research Institute, Shanghai’s new residential housing turnover in 2020 was about 9.178 million square meters, up 23.1 percent year-on-year and a four-year high; second-hand residential turnover was 302,000 units, up 27 percent year-on-year and also a near four-year high.
Some analysis says that the tight supply of residential housing in Shanghai has contributed to the growth of transactions. According to statistics, there is a balance of 6.78 million square meters of new property supply in 2020, down 10% year-on-year, but the number of transactions increased by more than 10% year-on-year.
In addition, in order to boost the sluggish economy, the Chinese Communist Party authorities have released water (monetary easing) frequently by the central bank and increased credit allocation, with many funds flowing to the housing market. At the same time, Shanghai has a strong “relocation” and “old reform”, expanding the demand for residential housing; plus some investors have the mentality of “buying up but not buying down”, in the case of high prices The more people are eager to enter the market. All these factors make Shanghai residential housing market heating up, there are good school district is even a hard to find a room.
Industry insiders say there are recent signs of tightening bank credit to curb investment speculation and sharp increases in housing prices. More than 80 percent of China’s home buyers buy their homes through bank loans, and without the support of easy credit policies, the real estate market may soon face a waning.
As for office buildings, the latest data from Colliers International shows that the vacancy rate in Shanghai’s office market rose to 22.7% in 2020, a nearly 10-year high. As vacancy rates rose, average office rents in Shanghai fell to RMB7.64 per square meter per day in the same year, a 10.7% year-over-year decline and a near nine-year low.
Shanghai’s office market has been in tatters since the epidemic hit the city in early 2020, and vacancy rates will continue to rise as supply increases in the second half of this year.
Colliers International points out that new supply in the Shanghai office market will peak this year and next, with an average annual supply of more than 2 million square meters, and vacancy rates are expected to rise to 29.1% and 31.4% this year and next.
Guo Shuqing, chairman of the Communist Party of China’s Banking and Insurance Regulatory Commission, recently admitted that real estate is the biggest “gray rhinoceros” in China’s financial risk at this stage. Financiers are concerned that China’s financial risks have reached a point where they have to be prevented, but the authorities are having trouble coping with the market shocks brought on by the plunge in housing prices.
Recent Comments