Looking For Global Real Estate: Buy Shanghai

A study by DTZ/Cushman & Wakefield shows that Chinese real estate investors prefer Shanghai. This market knows no bounds. (Shutterstock)

Over the last five years of observing and reporting on the Chinese housing market, one thing is certain. China real estate is beyond bubble. It’s post-bubble. Or even bubble-proof. With the urbanization trend still in effect, and with real estate the preferred investment for a growing middle class who don’t have enough money to shuffle into Hong Kong or further afield, China housing is the hottest real estate market around.

Shanghai is Asia’s London and New York.



On Wednesday, global property consultancy DTZ/Cushman & Wakefield said that Shanghai in particular will likely maintain double-digit growth in transaction volume and value this year. The main buyers are domestic, but foreign investors are not far behind.

Real estate investment deals, excluding land sales, are focused to total $70 billion in Shanghai in 2016, a 20% increase from about $58 billion last year, according to a report by Wakefield.

The report cited low capital costs in China (and in core economies like Japan) and yuan depreciation expectations lending to fears that now is the time to get into the market before the currency value dives. The yuan is currency trading at 6.67, but consensus estimates have it pushing closer to 7 in the next six months.

The report also cited demand by local insurance companies who need hard assets to hedge against low yielding fixed income. Insurance companies tend to invest in bonds. But when global bonds are yielding less than 3% and inflation is around 1% in China, that doesn’t live a lot of growth for insurers who need to have assets that can cover account holder liabilities. Many U.S. cities have been on the receiving end of China life insurance company real estate investments, including properties in Boston and the famous Waldorf Astoria. The iconic New York City hotel is now owned by China’s Anbang Insurance.

In Shanghai, Chinese individuals still play the dominant role in the market. Of the $18 billion worth of property deals completed in the first six months of this year, 76% were sealed by domestic investors.

Investors are looking for income. Office buildings continue to be the most sought-after properties, accounting for nearly 60% of the total by value sold this year, Cushman data showed.


Sourced- Forbes