URBAN VIEW -1-
Contents:
2015 Issue No. 8
02 Data & Views Macro Economy
Urban Data - Shanghai Inventory
Residential Price Index
Urban Analysis - Real Estate Market
Costs of Building Materials &
Construction
23 Industry Focus Real estate market in the era of
negative interest rate
27 In-Depth Observation Merger of Jing’an and Zhabei
36 News Guidance Policy & Regulation
Real Estate Finance
Market Highlights
Hosted by: Urban Surveyors -
Shanghai Urban Real Estate
Appraisal Co., Ltd. (SUREA)
Chief Editors: Yuan Donghua, Xu
Jun
Deputy Editors-in-Chief: He Jian,
Ren Tingzhen
Executive Editor: Qin Yun
Associate Editors: Shao Minghao,
Huang Haisheng, Jiang Qimin, Lin
Feng
Editors: Lin Jingjun, Ren
Chenying, Shi Jian, Mi Huiying
Art Editor: Zhang Tao
Address: 15-18F New Golden
Bridge Plaza, No. 1 West Beijing
Road, Shanghai
Postcode: 200003
Website: www.surea.com
Email: [email protected]
Tel: 86 21 63589988
URBAN VIEW -2-
Data & Views
CPI returned to the level of 1 percent and YoY decline of PPI was
stabilizing
City index soared by 2.09% MoM, increasing by over 10% YoY
Business-oriented land supply returned to the high level
Volume of new supply reached a new high in busy season
The transaction volume of pre-owned homes exceeded 30,000 units
for the sixth consecutive month
URBAN VIEW -3-
Macro Economy
Trend of CPI & PPI, Jan 2013 ~ Sept 2015
Growth of Shanghai Real Estate Loans, Jan 2013 ~ Aug 2015
CPI (Sept)
Category YoY % MoM %
CPI 1.6 0.1
Food 2.7 -0.1
Tobacco, liquor and articles 3.8 -0.1
Clothing 2.8 0.8
Household appliances and
maintenance services
1.0 0.1
Health care and personal
articles
2.1 0.2
Transportation and
communication
-2.1 -0.4
Recreation, education,
culture articles and services
1.4 0.5
Residence 0.8 0.1
PPI (Sept)
Category YoY % MoM %
PPI -5.9 -0.4
Means of production -7.7 -0.6
Mining industry -21.2 -2.2
Material industry -11.4 -0.9
Process industry -4.8 -0.3
Means of livelihood -0.3 0.1
Food 0.0 -0.1
Clothing 0.8 0.4
Articles for daily use -1.0 0.1
Durable consumer goods -0.6 0.1
-100
-50
0
50
100
150
200
250
13-1
13-2
13-3
13-4
13-5
13-6
13-7
13-8
13-9
13-1
013
-11
13-1
214
-114
-214
-314
-414
-514
-614
-714
-814
- 914
-10
14-1
114
-12
15-1
15-2
15-3
15-4
15-5
15-6
15-7
15-8
RMBmillion
Growth of real estate development loansGrowth of personal housing loans
x 10
0
URBAN VIEW -4-
Urban Data
- Shanghai Inventory Residential Price Index 1. The city index saw a significant MoM increase of 2.09% and a YoY growth
over 10%.
In September 2015,
Shanghai Inventory
Residential Price Index was
176.66, a MoM increase of
2.09% and a YoY growth of
10.49%. The golden
September and silver
October of real estate market were coming. Driven by the previous favorable news in
various aspects, the inventory residential index still had some room for growth.
Shanghai Inventory Residential Price Index reached 176.66 in September 2015, a MoM growth of 2.09% and a YoY rise of 10.49%.
The city’s index increase over the past three months
Month Index MoM Increase
2015. 7 169.79 1.51%
2015. 8 173.04 1.91%
2015. 9 176.66 2.09%
URBAN VIEW -5-
2. Price index within the Inner Ring Road rose by 3.41% in this month.
The index increase
within the Inner Ring
Road was 3.41%, the
highest in this
month; the index
increase between the
Suburban and Outer
Ring Roads was
0.70%, the lowest in
this month.
3. 57 sections saw increases over 2%. Only Nanqiao New Town and Jinshan
New Town sections saw slight drop.
In September 2015, most of the sections saw increases in price index, among which
57 sections saw growth over 2%, 14 more than the number of last month. Only
Nanqiao New Town and Jinshan New Town sections saw slight drop.
Between OR and SR173.84 1.91%
Within IR 185.64 3.41%
Between IR and MR 187.48 2.26%
Between MR and OR 181.46 1.96%
Outside SR 143.38 0.70%
URBAN VIEW -6-
Urban Analysis——Land Market 1. Supply
1) Overall Supply
The supply of business-oriented land in September was the second highest for the
year, namely, 110.6 hectares. By contrast, the listing volume of industrial land saw a
significant MoM decline to 12.4 hectares.
2) Supply of Business-oriented Land by Type
By type, commodity residential land played a leading role on the market with 71.7
hectares listed in total; 16.7 hectares of mixed-use land (incl. residential use) were
supplied, ranking No. 2; 13.1 hectares of affordable housing land and 9 hectares of
retail/office land were supplied.
0
100
200
300
400
500
600
14-09 14-10 14-11 14-12 15-01 15-02 15-03 15-04 15-05 15-06 15-07 15-08 15-09ha.
Trend of Land Supply
Business-oriented land Industrial land
0
20
40
60
80
100
120
140
160
14-09 14-10 14-11 14-12 15-01 15-02 15-03 15-04 15-05 15-06 15-07 15-08 15-09ha.
Supply of Business-oriented Land by Type
Commodity residential land Retail/office land
Affordable housing land Mixed-use land (incl. residential use)
URBAN VIEW -7-
2. Transaction Volume
1) Overall Transaction Volume
Driven by the recovery of supply, the land transaction volume rebounded to 73.8
hectares in this month, a MoM jump of 378%; the transaction volume of industrial
land saw slight increase again, with 30.2 hectares traded.
2) Transaction Volume of Business-oriented Land by Type
By type, the transaction volume of commodity residential land remained No. 1, with
49.1 hectares transacted; 8.96 hectares of mixed-use land (incl. residential use) were
transacted; 8 hectares of affordable housing land and 7.8 hectares of retail/commercial
land were transacted.
0
100
200
300
400
500
600
14-09 14-10 14-11 14-12 15-01 15-02 15-03 15-04 15-05 15-06 15-07 15-08 15-09ha.
Trend of Land Transaction Volume
Business-oriented land Industrial land
0
20
40
60
80
100
120
140
160
180
14-09 14-10 14-11 14-12 15-01 15-02 15-03 15-04 15-05 15-06 15-07 15-08 15-09ha.
Transaction Volume of Business-oriented Land by Type
Commodity residential land Retail/office land
Affordable housing land Mixed-use land (incl. residential use)
URBAN VIEW -8-
3. Transaction Price
The average transaction price of business-oriented land rose to RMB 24,117/sqm. The
average transaction price of commodity residential land reached RMB 22,957/sqm
with multiple parcels of plots transacted at a premium. Driven by two prime plots, the
average transaction price of mixed-use land (incl. residential use) rebounded to RMB
65,017/sqm. The average transaction price of retail/office land was RMB 2,853/sqm,
with only one parcel in Chongming traded. The average transaction price of industrial
land declined to RMB 1,272/sqm in this month.
0
20000
40000
60000
80000
100000
120000
14-09 14-10 14-11 14-12 15-01 15-02 15-03 15-04 15-05 15-06 15-07 15-08 15-09RMB/sqm
Average Transaction Price of Business-oriented Land
Business-oriented land Commodity residential land
Retail/office land Mixed-use land (incl. residential use)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
14-09 14-10 14-11 14-12 15-01 15-02 15-03 15-04 15-05 15-06 15-07 15-08 15-09RMB/sqm
Average Transaction Price of Industrial Land
Industrial land
URBAN VIEW -9-
Urban Analysis——New Residential Market 1. Supply and Demand, Transaction Volume and Price
In September 2015, the city’s new commodity residential supply totaled 1,831,100
sqm, a MoM increase of 135.96% and a YoY growth of 41.24%; the transaction area
totaled 1,370,700 sqm, a MoM rise of 9.96% and a YoY rise of 77.42%. By far, the
monthly transaction volumes in the second and third quarters were both beyond
1,200,000 sqm. In this month, the transaction prices averaged RMB 29,817/sqm,
falling MoM by 0.87% and increasing YoY by 7.86%.
0
50
100
150
200
14-9 14-10 14-11 14-12 15-1 15-2 15-3 15-4 15-5 15-6 15-7 15-8 15-9
sqmMonthly Supply & Demand for Commodity Housing
Supply area Transaction area
x 10
000
-15
-10
-5
0
5
10
15
20
25
30
35
20,000
22,000
24,000
26,000
28,000
30,000
32,000
34,000
36,000
14-9 14-10 14-11 14-12 15-1 15-2 15-3 15-4 15-5 15-6 15-7 15-8 15-9
%RMB/sqm Average Transaction Price of Commodity Housing
MoM YoY Average transaction price
URBAN VIEW -10-
2. Hot Sections
Top 10 sections in terms of commodity residential transaction volume across the city in Sept 2015
Rank Section Supply Area
(sqm)
Transaction
Area
(sqm)
Average Transaction
Price
(RMB/sqm)
Turnover
(RMB
Billion)
1 Jiading New Town 101,539 90,935 21,143 1.923 2 Songjiang New Town 153,635 90,637 21,744 1.971 3 Lingang New Town - 86,244 9,828 0.848 4 Qilian - 58,376 28,239 1.648 5 Zhoukang 82,416 50,909 30,074 1.531 6 Jinshan New Town 162,548 48,703 11,105 0.541 7 Sijing 51,969 43,372 25,233 1.094 8 Qingpu Town 65,988 42,824 20,894 0.895 9 Nanxiang - 41,896 26,818 1.124
10 Xujing 54,487 37,864 35,771 1.354
Top 10 projects in terms of commodity residential transaction volume across the city in Sept 2015
Rank Project Name District Section
Transaction
Area
(sqm)
Average
Transaction
Price
(RMB/sqm)
1 Yihao Garden Nanhui Lingang New Town 69,333 8,576 2 City Oasis Baoshan Qilian 32,581 25,643 3 Leisure Town Qingpu Qingpu 24,827 19,704 4 Firenze Park Pudong Zhangjiang 21,534 52,002 5 Agile Star Garden Songjiang Songjiang New Town 21,026 17,021 6 Fontainebleau Jinshan Fengjing Town 17,386 11,109 7 Royal Scenery Jiading Jiading New Town 15,566 23,441 8 Jin Han Garden Jinshan Jinshan New Town 15,255 12,243 9 Honor Mansion Putuo Changzheng 15,064 45,414
10 Evergrande Royal Garden Songjiang Songjiang New Town 13,379 23,080
URBAN VIEW -11-
3. Hot New Supply
Top 10 projects in terms of new commodity residential supply across the city in Sept 2015
Rank Project Name District Section New Supply Area
(sqm)
1 The Beautiful City Pudong Huamu & Beicai 131,093 2 Jin Han Garden Jinshan Jinshan New Town 71,728 3 Begonia Bay Nanhui Zhoukang 59,914 4 Yulin Mansion Chongming Chengqiao 52,530 5 Emerald Riverside Pudong Yuansheng Yangjing 52,231 6 Cyan Interantional Zhabei Everbright City 50,285 7 Mutual Appreciate Pudong Caolu 48,894 8 The Capital of Jinshan Jinshan Jinshan New Town 47,059 9 Hongqiao Mansion Minhang Jinhongqiao 47,035
10 Elite Mansion Jinshan Jinshan Jinshan New Town 43,760
4. Transaction Structure
below 1m11%
100~15010%
150~20016%
200~30026%
300~40013%
400~5007%
above 5m17%
Transaction Structure of Commodity Housing by Total Price, Sept 2015
below 704%
70-9028%
90-14549%
145-20011%
200-3007%
above 3001%
Transaction Structure of Commodity Housing by Area, Sept 2015
below 1m11%
100~15014%
150~20012%
200~30023%
300~40013%
400~5008%
above 5m19%
Transaction Structure of Commodity Housing by Total Price, Aug 2015
below 704%
70-9025%
90-14550%
145-20012%
200-3008%
above 3001%
Transaction Structure of Commodity Housing by Area, Aug 2015
m = million
URBAN VIEW -12-
By area, the proportion of properties with an area below 90 sqm increased by 2.56
percentage points in total while the proportions of properties with an area between 90
to 300 sqm all slightly decreased.
By total price, the proportions of properties priced RMB 1.5-3 million rose by 6.71
percentage points in total. The proportions of properties priced RMB 1-1.5 million
and properties priced over RMB 3 million declined to different extent. The
proportions of properties priced RMB 1-1.5 million saw a larger decrease of 4.26
percentage points.
5. Inventory Change
As of end-September 2015, the city’s first-hand residential inventories totaled 85,115
units, increasing by 4,018 units compared with last month.
30000
40000
50000
60000
70000
80000
90000
100000
Sept Jan May Sept Jan May Sept
UnitsChange of Shanghai Residential Inventory, Sept 2013~Sept 2015
URBAN VIEW -13-
Urban Analysis——Second-hand Residential Market 1. Transaction Volume and Price
In September, the city’s second-hand residential transaction volume totaled 33,555 units,
slightly increasing by 4.44% MoM and rising by 186.82% YoY; the average price signed
on the Internet was RMB 25,249/sqm, up by 0.6% MoM and 22.38% YoY.
2. Transaction Volume by District
By district, among the 19 districts in Shanghai, 17 districts seeing MoM increase in
transaction volume, ranging from 0.21% to 18.87%. Fengxian ranked the No. 1 in terms
of monthly increase. In this month, only Huangpu and Songjiang saw MoM decrease in
transaction volume by 0.33%-1.17%.
15,000
18,000
21,000
24,000
27,000
30,000
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
14-9 14-10 14-11 14-12 15-1 15-2 15-3 15-4 15-5 15-6 15-7 15-8 15-9 RMB/m2
Transaction Volume and Price of Second-hand Housing
Transaction volume (unit) Average transaction price (RMB/㎡)
Units
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Baoshan
Changning
Chongming
Fengxian
Hongkou
Huangpu
Jing'an
Jiading
Jinshan
Luwan
Minhang
Nanhui
Pudong
Putuo
Qingpu
Songjiang
Xuhui
Yangpu
Zhabei
UnitsTransaction Volume of Second-hand Residential Housing by District, Aug vs Sept 2015
August September MoM
Average MoM
Growth
URBAN VIEW -14-
3. Hot Sections
Top 10 sections in terms of MoM increase in secondhand residential transaction volume in Sept 2015
Rank District Section No. of Units
Transacted MoM YoY
1 Minhang Jiangchuan Road 353 31.23% 155.80% 2 Fengxian Haiwan 100 26.58% 96.08% 3 Changning Gubei 129 24.04% 268.57% 4 Fengxian Nanqiao New Town 494 21.67% 165.59% 5 Nanhui Hangtou 182 21.33% 279.17% 6 Baoshan Yanghang 417 21.22% 390.59% 7 Putuo Changshou 200 21.21% 233.33% 8 Yangpu Huangxing 531 20.68% 205.17% 9 Jiading Zhenxin 209 19.43% 171.43%
10 Zhabei Pengpu 707 19.22% 236.67%
4. VISS Base Price
According to the statistics
of VISS system, in
September 2015, the city’s
mean of residential
quarters was RMB
32,268/sqm, up by 2.38%
MoM and 11.24% YoY; the city’s median of residential quarters was RMB 32,500/sqm,
up by 1.81% MoM and 9.59% YoY.
From the view of regional base prices on a monthly basis, in September, all the districts
saw growth varying from 0.05% to 3.69%.
BS CN CM FX HK HP JA JD JS LW MH NH PD PT QP SJ XH YP ZB
Aug 2015 1.99% 1.61% 0.35% 0.46% 2.42% 3.41% 2.96% 1.56% 0.25% 4.26% 1.31% 1.81% 3.25% 1.95% 0.89% 1.13% 3.02% 2.69% 1.82%
Sept 2015 2.80% 2.45% 0.55% 0.05% 2.49% 3.69% 2.33% 1.51% 0.23% 2.35% 2.18% 1.38% 2.68% 2.52% 0.64% 1.11% 2.20% 2.97% 3.57%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%MoM Change of Base Price by District, Aug 2015 vs Sept 2015
Mean Median
URBAN VIEW -15-
Central districts still saw larger growth, all of which were over 2%. Huangpu district
ranked No. 1 in terms of monthly increase.
By section, all the 121 sections saw growth of base price in September, and there were
118 sections seeing MoM increase in base price and 3 sections seeing MoM decrease.
The top five sections in terms of base price increase were all influenced by school district
apartments and sub-new apartments.
5. Transaction Structure
Top 5 sections in terms of increase Top 5 sections in terms of decrease
Yangjing
Daning
Songbao
People’s Square
Huamu
46,103 48,507 5.21%
37,617 39,527 5.08%
26,982 28,277 4.08%
46,283 48,418 4.61%
43,389 45,315 4.44%
Haiwan
Zhujiajiao
Nanqiao New Town
8,993 8,944 0.54%
12,991 12,978 0.10%
16,970 16,967 0.01%
below 7043.22%
70-9023.11%
90-12018.48%
120-1509.57%
150-1802.68%
180-3002.55%
above 3000.40%
Transaction Structure Second-hand Housing by Area, Sept 2015
below 0.5m4.39% 0.5m~1m
14.19%
1m~1.6m29.10%
1.6m~2m13.75%
2m~3.3m24.43%
3.3m~5m8.33%
above 5m5.81%
Transaction Structure of Second-hand Housing by Total Price, Sept 2015
below 7042.07%
70-9022.99%
90-12019.31%
120-1509.97%
150-1802.61%
180-3002.66%
above 3000.39%
Transaction Structure Second-hand Housing by Area, Aug 2015
below 0.5m4.69% 0.5m~1m
13.59%
1m~1.6m28.37%
1.6m~2m13.88%
2m~3.3m24.99%
3.3m~5m8.85%
above 5m5.62%
Transaction Structure of Second-hand Housing by Total Price, Aug 2015
m = million
URBAN VIEW -16-
By total price, in September, the transaction proportions of second-hand properties priced
RMB 0.5-1.6 million rose by 1.33 percentage points in total; while the transaction
proportions of second-hand properties priced RMB 2-5 million decreased by 1.08
percentage points.
By area, the proportions of properties with an area below 90 sqm expanded across the
broad. The proportion of properties with an area below 70 sqm mounted up by 1.15
percentage points. The proportions of properties with an area of 90-120 sqm saw the
largest decrease, namely, 0.83 percentage points.
URBAN VIEW -17-
Urban Analysis——Retail / Office Market 1. Supply
1) Monthly Retail / Office Supply
The new supply of retail properties, declined to 223,000 sqm in this month. By contrast,
the office supply rose to 484,000 sqm, the second highest in the year.
2) Retail / Office Supply by District
In terms of the new supply in office sector, Pudong led the ranking of supply volume
with over 300,000 sqm, driven by the Shangyue Center project. In retail sector, Pudong
was also the No. 1 with 76,000 sqm supplied, followed by Jinshan with 30,000 sqm
supplied.
0
10
20
30
40
50
60
14-09 14-10 14-11 14-12 15-01 15-02 15-03 15-04 15-05 15-06 15-07 15-08 15-09sqm
Trend of Retail / Office Supply
Retail property Office property
x 10
000
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Baoshan
Chongming
Fengxian
Hongkou
Huangpu
Jiading
Jinshan
Jing'an
Minhang
Pudong
Qingpu
Songjiang
Xuhui
Yangpu
Zhabei
sqm
Retail / Office Supply by District, Sept 2015
Retail property Office property
x 10
000
URBAN VIEW -18-
2. Transaction Volume
1) Monthly Retail / Office Transaction Volume
In the “golden September”, the transaction on retail market saw significant recovery and
the transaction on office market saw slight uptrend. The retail transaction volume totaled
125,000 sqm, a MoM increase of 21.3%. The office transaction volume rose by 4.6% to
211,000 sqm.
2) Retail / Office Transaction Volume by District
By district, Pudong won the sales No. 1 in retail sector, with 46,000 sqm transacted.
Baoshan and Qingpu were the No. 2 and No. 3, with 17,000 sqm and 14,000 sqm
transacted, respectively. In the office sector, Xuhui was the sales No. 1, with 41,000 sqm
transacted. Jiading remained No. 2, with 39,000 sqm transacted.
0
5
10
15
20
25
30
35
40
14-09 14-10 14-11 14-12 15-01 15-02 15-03 15-04 15-05 15-06 15-07 15-08 15-09sqm
Trend of Retail / Office Transaction Volume
Retail property Office property
x 10
000
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Baoshan
Chongming
Fengxian
Hongkou
Huangpu
Jiading
Jinshan
Minhang
Pudong
Putuo
Qingpu
Songjiang
Xuhui
Yangpu
Zhabei
sqm
Retail / Office Transaction Volume by District, Sept 2015
Retail property Office property
x 10
000
URBAN VIEW -19-
3. Transaction Price
Compared with last month, the average transaction price of both retail and office
properties saw slight increase in this month. The average price of retail properties was
RMB 23,124/sqm, a MoM growth of 8.5%. The average price of office properties
declined to RMB 24,028/sqm, a MoM rise of 10%.
4. Inventory Change
In September, the office inventories jumped to 9,558,200 sqm, further approximating to
the high level of office inventories. The retail inventories totaled 9,982,700 sqm and the
supply-to-demand ratio was 1.78. Based on the average absorption in the past 12 months,
the sale period would be as long as 80.7 months.
0
5000
10000
15000
20000
25000
30000
35000
40000
14-09 14-10 14-11 14-12 15-01 15-02 15-03 15-04 15-05 15-06 15-07 15-08 15-09RMB/sqm
Trend of Average Transaction Price
Retail property Office property
400
500
600
700
800
900
1000
1100
sqm
Monthly Change of Retail / Office Inventory
Retail property Office property
x 10
000
URBAN VIEW -20-
Cost of Construction Materials
Prices of steel, cement, yellow sand and commodity concrete in Sept 2015
No. Material name Aug 2015 Sept 2015 Increase or decrease
1 Wire price (Φ8mm) (RMB/ton) 2465.33 2,371.00 -3.98%
2 HRB400 rebar (18mm) (RMB/ton) 2312.00 2,164.33 -6.82%
3 HRB400 Rebar (25mm) (RMB/ton) 2339.00 2,190.33 -6.79%
4 Ordinary Portland cement (strength grade
42.5) (RMB/ton) 265.00 266.67 0.63%
5 Yellow Sand (medium-coarse)
(RMB/ton) 58.00 56.67 -2.35%
6 Pump Concrete C30 (particle size 5-25)
(RMB/m³) 336.00 333.33 -0.80%
URBAN VIEW -21-
Construction Cost Analysis Indicators
I Project Summary
Project name XX Kindergarten GFA 8,641 m2
Project location Pudong New Area – beyond the
Outer Ring Road Height
13.1 m (the first floor is
4.2 m, the second and
third floors are 3.6 m
Structure type Frame structure Total
floors 3 floors aboveground
Function Kindergarten Method of
charging
Charge by BOQ, prices
from 2010.4-2013.7
II Construction Cost Indicators
No. Item Total cost (RMB) Index per sqm
(RMB/m2) Percentage
Cost for engineering
& installation 39,359,500 4,554.97 100.00%
I Engineering works 15,635,000 1,809.40 39.72%
1 Soil (Stone) works 121,400 14.05 0.31%
2 Piling & foundation
(incl. soil protection) 1,351,000 156.35 3.43%
3 Masonry 616,300 71.32 1.57%
4 Concrete and rebar
concrete 11,884,100 1,375.32 30.19%
5 Factory warehouse
doors, special doors 292,800 33.88 0.74%
6 Roofing &
waterproofing 579,300 67.04 1.47%
7
Anti-corrosion,
insulation, thermal
insulation
253,200 29.30 0.64%
8 Other work 536,900 62.13 1.36%
II Decoration works 11,797,000 1,365.24 29.97%
1 Ground & floor 2,455,500 284.17 6.24%
2 Doors and windows 588,700 68.13 1.50%
3 Cylinder & wall 1,016,500 117.64 2.58%
4 Ceiling 2,030,200 234.95 5.16%
5 Paints, coatings, wall
paper 569,900 65.95 1.45%
6 Other work 5,136,200 594.40 13.05%
III Installation works 10,185,000 1,178.68 25.88%
URBAN VIEW -22-
1 Electrical Engineering 3,501,200 405.18 8.90%
2 Water supply &
drainage and gas 859,400 99.46 2.18%
3 Firefighting works 1,436,500 166.24 3.65%
4 Ventilation and air
conditioning works 2,427,100 280.88 6.17%
5 Intelligence works 1,680,900 194.53 4.27%
6 Elevator works 279,900 32.39 0.71%
IV Measure fees 1,742,500 201.65 4.43%
Shanghai Urban Construction Cost Consulting Co. Ltd.
URBAN VIEW -23-
Industry Focus
Real estate market in the era of negative interest rate
Negative interest rate may drive the further recovery of the market.
Don’t invest in real estate market blindly. Beware of risk.
The era of negative interest rate is a good time to buy housing.
URBAN VIEW -24-
Real estate market in the era of negative interest rate
According to the data from State Statistics Bureau, CPI in August rose by 2.0% YoY.
On the other side, the one-year benchmark deposit interest rate was 1.75% after multiple
times of reduction. This means that CPI has been higher than the one-year benchmark
deposit interest rate – we are in the era of negative interest rate again.
There were 4 periods of negative interest rate in China, during which real estate prices
all went up. In addition to China, real estate prices also rose significantly during the
periods of negative interest rate in western countries and Japan. Therefore, many people
think real estate sector will first benefit from the negative interest rate as capitals are
forced to flow to asset sectors due to the depreciation of deposit. However, some market
participants think investing in real estate sector blindly may undertake much risk. In this
section, our discussion will revolve around the influence of the era of negative interest
rate on real estate market.
URBAN VIEW -25-
Urban View:
Shao Minghao
Project Director
Shanghai Urban Real Estate Appraisal Co., Ltd.
Reviewing the past periods of negative interest rate in China, the positive stimulus on
real estate market depended on the following three conditions: firstly, residents’
(individual) deposits accounted for a large percentage of the large scale bank deposits,
and negative interest rate drove them out of this investment channel; secondly, there
were only a few investment channels with low entry requirements in China so the capital
from bank deposits could only flow into a few limited sectors, such as stock market, real
estate market; thirdly, among the limited investment channels, real estate sector had the
highest risk-reward ratio.
Now, in the autumn of 2015, are these three conditions still satisfied? First of all, from
the perspective of individual deposit, many financial products represented by Yuebao
have already attracted deposits from banks. The current scale and percentage of
individual middle- to long-term deposits are incomparable with the earlier ones. At
present, the interest rates of financial products average over 3%, much higher than that
CPI. Therefore, the spillover effect on bank deposits caused by negative interest rate has
been greatly moderated.
Secondly, from the perspective of investment channels, in these years, various bank
financial products emerged in endlessly, and multiple short-selling mechanism, QDII
and even direct purchase of foreign exchange have already been residents’ important
investment channels. As investing and financing channels for individuals are
increasingly enriched, the attraction of real estate sector to investment gradually
decreases.
URBAN VIEW -26-
Thirdly, the income-risk ratio of investment in real estate sector is not as satisfactory as
before. As we all know, there is no market only suffering downturn and not seeing
upturn and vice versa. Over the past decade, the real estate market only saw upturn and
has not suffered downturn, during which much risk has been accumulated. Moreover,
since last year, under the continuous relaxation of real estate market on national and
local levels, only the real estate market in first-tier cities and several second-tier cities
witnessed recovery. In the third- and fourth-tier cities seeing downturn, real estate has
lost its ability of preserving or increasing the value.
From the above analysis, we can find that the three conditions bringing positive stimulus
of negative interest rate to the real estate market all have greatly changed, compared
with the same periods in the history. This kind of change indicates that negative interest
rate can hardly drive residents’ investment into the real estate sector and therefore the
stimulus of negative interest rate may be no longer as significant as before.
URBAN VIEW -27-
In-Depth Observation
Merger of Jing’an and Zhabei
Location value comparison between Jing’an and Zhabei
Educational resource comparison between Jing’an and Zhabei
Home price comparison between Jing’an and Zhabei
Why the home price in Zhabei rose prior to the news of merger?
URBAN VIEW -28-
Merger of Jing’an and Zhabei
Basic information of Jing’an and Zhabei
Jing’an District
Jing’an District is located in the city center of Shanghai, within the Inner Ring Road.
It neighbors 6 districts. Jing’an District is named after the Jing’an Temple therein. It is
the window of Shanghai’s central business and commercial areas as well as foreign
exchange. Jing’an District has jurisdiction over 5 sub-districts of Jing’an Temple,
Caojiadu, Jiangning Road, Shimen Road (No. 2) and West Nanjing Road.
Zhabei District
Zhabei District is located in the north part of Shanghai’s central area. It is adjacent to
Hongkou and Baoshan Districts on the east, neighbors Putuo and Baoshan Districts on
the west, borders on Baoshan on the north, and is separated from Huangpu and
Jing’an Districts by the Suzhou Creek on the south. There is Shanghai Station and
Beijiao Station of railway, metro line 1, 3, 4, 8, Inner Ring Road, South-North
Elevated Road and Middle Ring Road in the district. Zhabei District has jurisdiction
over 8 sub-districts of West Tianmu Road, Beizhan, Baoshan Road, West Zhijiang
URBAN VIEW -29-
Road, Gonghexin Road, Daning Road, Pengpu Xincun, Linfen Road and Pengpu
Town.
Location value comparison between Jing’an and Zhabei
Location plays a crucial role in real estate value. However, its importance reflects not
only on the value of real estate but also on various aspects of social life. Good
location always means the concentration of plenty of good resources, such as
complete infrastructures, full range of living facilities, well-developed transportation
system, mature living environment and superior humanistic culture.
URBAN VIEW -30-
Jing’an District is situated in the best location within the Inner Ring Road, where
there is the “No. 1 commercial street in China” – Nanjing Road (East Nanjing Road
and West Nanjing Road). Moreover, Plaza 66, CITIC Pacific Plaza and Westgate Mall
compose a “golden triangle”, and Wheelock Square, Park Place, Kerry Center Ph II
and other plazas form a “golden five-star”. Besides, there are many stores of famous
brands. The famous brands in this business area total over 1200, including more than
750 international brands. About 80% of the global top brands have flagship stores or
franchised stores here. Therefore, West Nanjing Road now is the top shopping place
in Shanghai.
On the other side, in old Shanghai, the west and middle parts of French Concession
and Shanghai International Settlement were called “upper corner”, where there were a
lot of compradors, foreigners and socialites. The counterpart “lower corner” referred
to the non-concession area and rural-urban fringe area, where many external people
from other provinces lived. In the old times, Jing’an belonged to the “upper corner”
while Zhabei belonged to the “lower corner”.
URBAN VIEW -31-
Zhabei District is also located in the downtown of Shanghai. However, the
development of its south part and north part is imbalanced due to its large coverage.
The main commercial areas in Zhabei include Daning commercial area and
Everbright city commercial area. Currently, it is just a district commercial center, the
scale and quality of which are not comparable with those of Jing’an District. But
according to long-term planning, Daning commercial area has been positioned as a
municipal commercial center, which will improve Zhabei’s commercial value with the
proposed Suhe Creek commercial center.
After the merger of the two districts, the location value of Jing’an may be reduced.
The large area of Zhabei will share the concentrated location value of Jing’an. And the
difference between “upper corner” and “lower corner” will to some extent lower the
position of new Jing’an in people’s mind.
URBAN VIEW -32-
While Jing’an enjoys advantages of economic strength, urban management and
infrastructures, it is faced with the lack of space for development. By contrast, Zhabei
owns sufficient space for future development. From long-term perspective, the merger
of the two districts will help reorganize the existing space resources, promote the
balanced development of central areas and facilitate the overall urban renewal.
Educational resource comparison between Jing’an and Zhabei
In terms of the total quantity of key educational resources, Jing’an seems to be a little
inferior to Zhabei. However, the area and population of Zhabei are both much larger
than those of Jing’an. From this point of view, in fact, the educational resources of
Jing’an are superior to Zhabei’s. Moreover, Jing’an has Primary School Affiliated to
Shanghai No. 1 Normal School and Jing’an No. 1 Primary School, which are typical
key primary schools; while the primary schools in Zhabei are not as renowned as
those in Jing’an.
List of educational resources in Jing’an and Zhabei
Jing’an Zhabei
Key kindergarten
Weihai Road Kindergarten Middle Zhijiang Road
Kindergarten
Nanyang Experimental Kindergarten
Zhabei Experimental Kindergarten
Nanxi Kindergarten Anqing Kindergarten
Key primary school
Jing’an Education College Affiliated School
Zhabei No. 1 Central Primary School
Primary School Affiliated to Shanghai No. 1 Normal
School
Zhabei No. 3 Central Primary School
Jing’an No. 1 Primary School Zhabei No. 2 Central
Primary School
----- Zhabei Experimental
Primary School
Key middle school
Jing’an Education College Affiliated School
Pengpu Middle School
Yucai Junior School Fenghua Middle School
URBAN VIEW -33-
Shixi Junior Middle School Yangbo Middle School
Shanghai International University Jing’an Language
High School Qingyun Middle School
----- Shibei Middle School
Municipal key high school
East China Model High School
Jiulong Model High School
Shixi High School Shanghai No. 60 High
School
Yucai High School Huiming High School
----- Shibei High School
----- Xinzhong High School
District key high school
Shanghai No. 1 High School Zhabei No. 8 High
School
Minli High School Pengpu High School
The High School Affiliated to Shanghai Theatre Academy
Fenghua High School
The merger of the two districts may influence the enrollment of key kindergartens and
high schools there. Both Jing’an and Zhabei have three model public kindergartens,
enrolling students in the district only. However, the population of Zhabei is much
larger than that of Jing’an so the number of existing model kindergartens cannot meet
the demand. After the merger, this problem in Zhabei will be mitigated but at the same
time, for Jing’an, the competition may be fiercer. So is the case with high school
enrollment.
Home price comparison between Jing’an and Zhabei
According to the movements of quarterly average transaction price of commodity
housing in Jing’an and Zhabei, the overall trends of the two districts were in line with
each other. The fluctuation in Jing’an was comparatively significant, mainly because
the transaction volume was small and the price was sensitive to the influence of single
property. In terms of the price of pre-owned homes, the trends of the two districts kept
URBAN VIEW -34-
flat. Overall speaking, the difference of average residential transaction prices in
Jing’an and Zhabei stayed in a relatively stable range. The commodity residential
price in Jing’an was about 72.31% higher than that in Zhabei on average; while the
pre-owned residential price in Jing’an was 74.88% higher than that in Zhabei.
According to the historical data, the difference between commodity residential prices
in Jing’an and Zhabei was quite big during 2011 to 2014. This was mainly because the
development of residential market was restricted by the regional environment,
infrastructures and facilities as well as the insufficient educational resources. Notably,
since 2014, the quarter-on-quarter increases of commodity residential price and
pre-owned residential price in Zhabei have been higher than those in Jing’an at most
time, showing a robust upward trend.
URBAN VIEW -35-
Why the home price in Zhabei rose prior to the news of merger?
Actually, despite the big difference between the home prices in Jing’an and Zhabei,
the real estate market in Zhabei has already been boosted by some eye-catching
events before the merger.
The first one was the “Daning land king” acquired by Franshion Properties in 2014.
Its final unit price was as high as RMB 47,609/sqm, which was not only much higher
than the price of previously transacted plots in this area but also beyond the base price
of the surrounding projects being sold at that time. Under the impact of land king, the
year-on-year increases of commodity residential price and pre-owned residential price
in Zhabei were higher than those in Jing’an in that quarter. The growth continued, and
now the average price of Franshion Daning Palace built on that plat has exceeded
RMB 70,000/sqm. The project thus became an iconic luxury project second only to
Suhe Creek.
URBAN VIEW -36-
This year, Everbright city section with prime location launched a parcel of land for
large-scale commercial/residential/office/cultural/sports use, which attracted market
URBAN VIEW -37-
attention again. The plot was finally acquired by Financial Street at RMB 8,815
million, with a premium of as high as 50%. Covering a GFA of about 350,000 sqm,
the site will be built into a new landmark in the Everbright City Section, which will
help improve the business atmosphere in this area. The upgrade of supporting
facilities will have positive externality on the residential properties in the vicinity,
laying a basis for price increase.
From all above, we can find that the gap between the average prices of commodity
homes in Zhabei and in Jing’an has been narrowing since 2014. The prime plots have
already driven the price of new homes in Zhabei. The price in Daning section, which
is closest to the price level in Jing’an, was also boosted by the above-mentioned land
king project.
URBAN VIEW -38-
News Guidance
With capital percentage reduced, middle- to high-end residential
development loosened
NDRC lowers housing transfer charges to promote real estate
consumption
CBRC adjusts down payment requirement for first ordinary homes
Ministry of Housing and Urban-rural Development issues notice on
the implementation of granting HPF loans to other locality
Land market performances represent divergence between first-tier
cities and second- and third-tier cities
URBAN VIEW -39-
Policy: With capital percentage reduced, middle- to high-end residential development loosened
On 14th September, the State Council website promulgated the Notice on Adjusting
and Improving the Capital System of Fixed Asset Investment Projects. In addition to
lowering the capital percentage of urban and transportation infrastructure and corn
deep-processing projects, the Notice stipulated that the capital percentage of all the
real estate development projects will be adjusted to 25% from 30%, excluding
affordable housing and ordinary commodity housing projects.
Urban View:
This was the second time that
the government had lowered
the capital percentage since
2009. From macro perspective,
it was an encouraging policy
based on the languid economy
growth because the growth of
investment in both fixed assets
and real estate development were slowing down. Notably, there were some differences
in the stipulation for different residential projects. Affordable housing and ordinary
commodity housing projects were not included in the reduction scope; while the
capital percentage of middle- to high-end residential projects and commercial, office
projects were all reduced. This was not only because the former already enjoyed
preferential policies but also indicated the government’s worry about the high
inventories of affordable housing and ordinary commodity housing in most third- and
fourth-tier cities. From the perspective of investment risk, with the decrease of birth
rate, the rigid demand for commodity homes would gradually decline accordingly in
the long term. Residential market had to consider the move-up demand when meeting
the rigid demand.
URBAN VIEW -40-
Policy: NDRC lowers housing transfer charges to promote real estate consumption
Recently, National Development and Reform and Ministry of Finance issued a notice
on the charging standard of administrative fees. The notice pointed out that as of 15th
October this year, the housing transfer charges would be lowered. By detail, the
transfer charges of new commodity homes were reduced to RMB 2 from RMB 3, and
transfer charges of inventory homes were lowered to RMB 4 from RMB 6. At the
same time, provinces could further lower the transfer charges in middle and small
cities based on local conditions to reduce the burden of home-purchase fee on
residents.
Urban View:
Housing transfer charges are paid by buyers when registering property ownership
certificate in the transaction of new homes; while in the transaction of second-hand
homes, transfer charges are required when transferring ownership and should be paid
by both buyer and seller but in practice it is usually paid by the buyer.
Actually, the transfer charges are not expensive and only account for a very low
percentage in home-purchase cost. Therefore, the cut is limited and will not greatly
attract home purchasers. However, we should pay attention to the implication of this
policy. The government’s efforts to promote real estate consumption in the “golden
September” and “silver October” showed its intention to support stable and sound
development of the real
estate market. It is a
kind of extension of
previous relaxation of
policies on real estate,
which targeted the
long-term development
of the real estate sector.
URBAN VIEW -41-
Finance: CBRC adjusts down payment requirement for first ordinary homes On 30th September, People’s
Bank of China and China
Banking Regulatory
Commission released the Notice
on Issues concerning Further
Improving the Differential
Housing Credit Policies. It said
that in cities free of purchase
limitation, the down payment
percentage would be adjusted to
no lower than 25% for first homes under commercial loans, and it pointed out that the
minimum percentage of down payment for homes under commercial loans should be
decided according to local conditions and the state’s policy.
Urban View:
Because of this policy, the down payment for first ordinary commodity homes was
lowered from 30% to 25%. Discussions about whether this reduction of merely 5%
was enough to stimulate the sluggish real estate markets in the third- and fourth-tier
cities could be heard without end. This just reflected the difficulty which the
administration was faced with – the policy should boost the languid market in the
third- and fourth-tier cities while at the same time it cannot stimulate the rising market
in the first-and second-tier cities; the administration hopes that the real estate market
can bring positive influence on the economic downturn while at the same time it
cannot go back to the old way of rescuing economy only by real estate market. For all
above, 5% may be just a try. If it is effective, it will end here; if it is ineffective, then
the government will do more. All in all, this time, real estate market played an
important role again in stopping the economic downturn.
URBAN VIEW -42-
Market: Ministry of Housing and Urban-rural Development issues notice on the implementation of granting HPF loans to other locality On 21st September, Ministry of Housing and Urban-Rural Development issued a
notice on the implementation of granting HPF loans to other locality to support
employees’ demand for buying homes in other locality.
Urban View:
Granting HPF loans to other locality
is not a new policy in real estate
sector. However, this notice was an
elaboration and emphasis on the
implementation, which defined the
procedures of applying personal
HPF loans in other locality.
Strengthening the connection
between HPF in different cities can
help promote the residential market of different cities and thus encourage residential
consumption while at the same time improving the use efficiency of HPF. For the
third- and fourth-tier cities with insufficient housing demand, the implementation of
this policy can effectively encourage those who live in the first and second-tier cities
with household registration in third and fourth-tier cities to buy homes in the places of
household registration or even surrounding cities to improve their living conditions
and mitigate the high inventories in these cities. However, for the first-tier cities in
great demand for housing, such as Shanghai, the implementation of this policy may
confront predicament. The influence of this new policy will vary significantly by city.
In the short run, the connection between middle and small cities and the connection
within a province are feasible; while the connection between large, middle and small
cities need further thought and discussion.
URBAN VIEW -43-
Market: Land market performances represent divergence between first-tier cities and second- and third-tier cities
In the middle of September, Ministry of Finance published the data of August, which
showed that the income from land granting from January to August declined by over
RMB 1 trillion compared with the same period in last year, down 38.4%. The sharp
decrease on land market has been a common phenomenon since this year. Even when
the sales of real estate saw a significant recovery in August, only the land market in a
few first and second-tier cities was limitedly driven. Despite of the fall of supply
volume, there were still many land parcels failing to be transacted. There were totally
1531 parcels of land transacted across over 300 countries nationwide, down 30% and
36% MoM and YoY, exceeding the decrease of supply.
Urban View:
At present, the performances of
land market all over the country
showed difference. On one side,
land kings created new high of
average transaction price in first
-tier cities. On the other side,
many second and third-tier cities
suffered from imbalance of
supply and demand and many auctions failed on the land market. The totally different
performances of land market fully reflected developers’ different views on the
prospects of real estate market of different cities. The fast recovery of real estate
market in first-tier cities is a kind of guarantee for developers, although most supply
in these cities is from the suburbs for lack of urban land resources. The declining
tendency in third- and fourth-tier cities with insufficient demand, high inventories and
large supply volume scares developers off these cities and makes them extremely lack
confidence in investment.
URBAN VIEW -44-
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