Wriggles and Enchantment of Shanghai Property Business
Posted on February 5, 2008
Filed Under Focus
In July 2006, the Chinese government issued a regulation on foreign owner-ship of property in that country, including Shanghai. The new rule, however, did not discourage investors from hunting for property in the so- called Asia’s “New York”. Even, in 2007, foreign investments in Shanghai’s pro-perty sector rose to US$2 billion. What were the real factors behind all this?
Should the world’s seven wonders be added with another one, Shanghai would not be an exaggerating choice. Indeed, the city, which is divided by River Huang Pua, is currently a magnet that sucks the attention of many investors from different parts of the world.
Investors find Shanghai’s eastern and western parts equally attractive. The western zone is home to The Bund area—Shanghai’s icon. Meanwhile, the city’s eastern part includes Pudong, the world’s fastest growing area.
The Bund is widely known as Shanghai’s, and even Asia’s, business heart since more than a century ago. Old, high buildings are indication of area businesses growing forcefully. The Bund serves as a meeting point between Western and Eastern business people, where business people from US, Europe and Asia have been vying for a dominant influence. Then, there is Nanking Road that has several similarities with Champ Elysee Paris.
Pudong was Shanghai’s marginal zone 15 years ago. To date, it is a place the People Republic of China has pride in. With all modern characters, Pudong has turned into an amazing zone. Structures or buildings qualified to be the world’s tallest are located in the area.
Unlike other countries that have deregulated property ownership so as to lure in foreign investors, Shanghai controls foreign ownership of property. But, despite that measure, investors feel even more tempted to do business in the city, which is also Asia’s economic power house.
The old saying “where there is sugar there are ants” applies to Shanghai at this time. It has become even more attractive to business people from around the world. Among them are Indonesian enterprises like Lippo, Sinar Mas, Salim, Gajah Tunggal, APP and Summarecon, which have to compete with players from other parts of the globe to secure a niche in the Shanghai market. Lippo, Sinar Mas and Summarecon have launched big enough property projects in the area. They built hotels, apartments, office buildings and housing complexes in Shanghai’s eastern and western areas.
Other than the Indonesian business players are investors from Singapore, Malaysia, Hong-kong and Brunei Darussalam, and also those from Europe and the United States. Their investment values are much bigger than the Indonesians. Shanghai has turned into a competition arena for world property giants. Singapore developer CapitaLand and Hong Kong’s giants Sung Hung Kai and Lee Kashing have succeeded to win relatively large rooms in Shanghai by investing up to hundreds of trillion rupiah.
Shanghai’s Attraction
The mounting animo of foreign investors to enter Shanghai has sparked this question: What makes the city so attractive? The answer is: Its strategic location and natural beauty could be the primary factor. Another factor is the so big market demand, also in the property sector.
World-class developers have opened property businesses in Shanghai so as to meet the so high demand for property. The city, which is 6,341 km in size, has a population of 20 million people, which guarantees so high demand. As a matter of fact, demand has increased beyond expectation because buyers have also come from neighboring areas. Surely, all this has made the Shanghai property market so busy. Whenever a new apartment is built, so many buyers rush in. The absorption capacity of apartments in Shanghai is so big albeit still below several cities including Dubai where all units of a 35-floor apartment were sold out within several hours.
Apartment unit prices in Shanghai, like in other cities, are determined by the location, apartment size, facilities offered, payment methods and others. An apartment unit is priced at 150,000 renmimbi (RMB), which is equivalent to Rp165 million per sqm. But, it could be Rp25,000 RMB (Rp27.5 million) per sqm in good enough areas like Pudong and Pusi, and even 12,000 RMB (Rp13.2 million).
Business people from Indonesia, Singapore, Brunei Darussalam, Malaysia and others, who have entered the Shanghai property market, bought apartments and then sold them after one year. Their profits could be 20-20% of sale prices.
Smart enough
On the other hand, world property players in Shanghai are smart enough to develop new creations including residences and apartments. For the house category, they develop villa models with Spanish, classical, mediterranian, modern tropical and minimalist styles; or a mixture of these, like the minimalist- modern tropical style.
Seemingly, the property business in Shanghai will remain lucrative in the years ahead. This is because the city is continuing to develop, area businesses are become even larger, and many more people will migrate to it. Business opportunities in the office building, apartment, hotel and housing sectors will surely continue to increase. Economic analysts estimate that the Shanghai property business will remain sparkling in the coming 15 years, at the very least. Giant projects valued at hundreds of trillion rupiah will continue to be developed in the city.
ASIA’S ‘NEW YORK’: Shanghai has now become a barometer for doing business in Asia.
Shanghai is practically growing with world-class parameters and variants. In the business context, it is taken into account by almost all world-class investors and/or companies. Large cooporations have set up their headquarters in Shanghai, thus strengthening its position as one of the world’s largest business hubs. Shanghai is leaping forward in the same row with New York, London and Tokyo.
Further, Shanghai is a city with the most rapid development in the infrastructure sector as compared with all other cities around the world. All sorts of transportation modes are found in the area, and they were built within 15 years only.
Moreover, another factor mostly decisive to China’s success in bringing in foreign investors is its government’s vision, which is so detailed and visionary with regard to national development. In June 2007, in Muncipality Planning Exhibition in Beijing, the Chinese government showed a short film about Beijing in the coming 62 years.
Beijing of October 1, 2069 or 120 years after the creation of the People’s Republic of China could be clearly visualized. Spectators were given a clear picture of Beijing development to be carried out by its government and what the capital will likely look in 62 years time when China masters science and technology.
The Chinese government can visualize its development plans not merely with abstract words that are hard to grasp, but, more importantly, with plans that can get people into the very reality, which the country is determined to achieve.
Not surprisingly, in the period of 18 years after Deng Xiaoping launched reforms, China could leap rapidly and reached its current development level. This happened because its leaders and thinkers could translate their dreams through visual forms that were graspable to the China people.
In such condition, both the China people and investors reaped benefits. The China people got quite a clear picture and felt certain about their future, while investors could feel certain about their investment prospects. All this has made Shanghai even more attractive.
Shanghai has now become a barometer for doing business in Asia, and even in the world. Entrepreneurs from around the globe have rushed into the city not only for reaping profits but also for raising their prestige by entering throat-cut competitions in the city. Those winning such competitions will not only reap benefits but also will enjoy a more respectable reputation. Such a situation will provide them with bigger opportunities to further develop and accumulate many more assets. As a result, they will be able to launch even larger expansion programs.
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