Real Estate Prices Evolution, a tale of two cities, Beijing and Shanghai

There is a small rift under way between two Chinese Tier I cities, the cities that are the showcase of China's economic success, Beijing and Shanghai. The difference is seen in the price evolution for residential and profesionnal real estate, but this has repercussions in the authorities policy. Is Shanghai about to rise higher than ever agains all the other Chinese cities, or is Beijing unstoppable rela estate price the sign of an unbelievable dynamism.

Beijing, the price are still rising


The problematic is simple: Beijing prices have risen dramatically in the past 20 years, sometimes more than 30% a year, for both rental prices and property prices. This causes a lot of trouble, even without considering that it might be the largest real estate bubble of all times, this is a source of potential siocial unrest. The young generation of Chinese people wishing to buy an apartment are now more and more unable to do so, the average salary in Beijing is still very low but housing prices are above many world large cities, creating a gap. The Beijing authorities have tried to implement a large set of measures to cool down the market, with buying restrictions for non Beijing residents, higher taxation, but there is still a strong dynamic in Beijing, the residential real estate property prices have risen of more than 26% in capital values in 2012, according to Colliers, the rise should “only” be 16% in 2013. This is a lot less, but this is still too much, and he Chinese authoritis are furious about it.

Shanghai, the prices are under control


In the meantime, the measures have proven to be a success in Shanghai. In 2012, the price rise has been 3% and it is exepected to be exactly the same in 2013, this is an achievement for Shanghai authorities, all the more that things are changing. An experimental free trade zone is being opened in Shnaghai, something very new to China that positions the city as a rival of Hong Kong. The China authorities have designed a new economic development zone with a lot of incitations in a couple of China's cities around Shanghai: Suzhou, Hangzhou and Nanjing. These cities together are now the gateway to China's commerce and economy, while, in the south things are moving fast as well: Hong Kong, Shenzhen and Guangzhou are willing to become a large new economic zone.




In this scheme, the always more expensive Beijing is “abandoned” as a purely adminstrative or touristic city, settled into heavy pollution.


Is this the way thigs are heading in China ?




Sources:

New York Times
Colliers International
Scout Real Estate
KPMG