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According to an investigation into China's 40 major cities, trade involving high-standard flats or luxury villas decreased, while the trade on medium and low cost houses surged. That's the demand from the huge middle-income families.
China’s entry in the World Trade Organization (WTO) was great bews for it's real estate industry, which was in cold-box until then.
WTO entry sent a positive message to foreign investors about China’s commitment to economic and market reforms. Demand from foreign firms grown and then there was some amazing construction activities for top-quality commercial, industrial and residential projects – and Chinese Realty Sector has become amongst the top in in world.
It has also resulted in higher rents and demand for more construction. Financial services, telecommunications, distribution and logistics, information technology, agriculture, and professional services industries, as well as Chinese consumers, are benefiting a lot.
Shanghai has seen many high-rises due to easing of restrictions on financial services companies. Banks and insurance companies are a major industry sector in Shanghai, and WTo had unleashed significant latent demand for real estate as the reforms unfolded.
The commercial and residential markets are overbuilt because too many developers rushed into China at the same time, and the strong demand was just not enough to fill the space. WTO will be a boost on the demand side, and may just fulfill some of the hopes that investors had when they came to China.
Based on a forecasting model developed by Cushman & Wakefield Research, a 1.5% increase in GDP growth (a figure suggested by China’s State Council Development Research Center) could increase demand for offices by an additional 20 percent in major Chinese cities.
Like the commercial market, the expatriate housing market will be positively affected. While certain companies have been reducing expatriates in the last several years (or at least the proportion of expatriates to overall employees), the wave of new companies coming to China will likely bring more senior expatriate managers. However, there is probably no Motorola or Shell waiting to enter China and it is expected that the majority of newcomers will be small to medium-sized businesses.
Mass Residential Market
Shanghai mass residential market booming, despite the constant warning of market overheating from various market participants, including the government. Sales prices growing and this trend is unlikely to stop any time soon. The volume of residential property transactions increased, and supply in the city remained in balance.
With the introdution of a series of government policies covering aspects as varied as land acquisition to the development of a secondary market in the City, we anticipate a more transparent and market-oriented environment to develop. In addition, the prices are gradually returning to a more rational and affordable level than seen overthe past three years.
Luxury Residential Market
Pent-up leasing demand for luxury apartments in Beijing was released after the SARS epidemic passed. But keener competition due to ample new supply in the market put the brakes on rental growth. The sales market for luxury units in Beijing continues to see activities slowly increasing but capital values remain subdued.
A high level of future supply is still believed to be one of the major concerns for the Beijing market. The expatriate leasing market in Shanghai has been very active as the City sees the continued expansion of foreign enterprises. And as a result, the market haswitnessed stable rental performance and declining vacancy rates, which we expect to continue over the short to medium term. Underpinned by the positive market fundamentals over the last two years, a number of luxury developments are plannedor have been offered for sale on strata title basis catering to the strong appetite forproperty investment.
Office Market
Space requirements from industries including automotive, insurance, banking and IT sectors serve as the key drivers for the growth of demand. However, prime office rents failed to reverse its downward trend as most developers continue to offer competitive rents to retain tenants. The reason behind can be largely attributed to an anticipated stronger competition in this supply-driven market. A shortage of existing prime space in the city is driving large space usersto make early commiments in some to be completed prime office buildings. The prime office market is forecast to continue its growth momentum, as witnessed by recent increases in rents.
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