It is approaching the three year anniversary of my purchase of my current house at Vanke Waltz Garden. I have been paying the mortgage of the house for three years and have lived in the house for two years. During the three years, the real estate market in Shanghai changed dramatically and affected millions of people. The current status of the market is still confusing – the house price is still rising like a rocket, while the voice of the bubble theory is becoming stronger day by day. It is a good time to take a look at the houses in Shanghai by reviewing the three years we went along.
Why I bought this House
Many people commented on the house and asked why I bought this house. “I am interested in why you chose to move to Vanke’s Waltz Garden: what attracted you to the place?”
Well. I chose the house by a simple reason – I love the Real Estate Developer – Vanke. The Vanke group is the largest real estate developer in China. Vanke is a magic word for me. It has turned many county areas into beautiful town house.
At the time I bought the house in early 1999, the average price per sq. meter is about 3000 RMB. Typical apartment is from 90 – 120 sq. meters in Shanghai. That made the total price to be 300,000 RMB or 36,000 USD. It was a huge number already. However, the Vanke house was priced higher. The 5000 RMB per sq. m is even higher than the adjacent properties.
Looking back, it turned out to be a good deal. The price for the houses has almost doubled in three years. Now it is almost impossible to buy any house within the inner ring less than 7000 RMB per sq. m.
“I understand that Vanke’s Waltz Garden is also called a new “xiao qu” or “she qu”? Are these very popular housing options in Shanghai now?” – Mr. Pow from Singapore.
Yes. It is called Xiao Qu or Community in English. It is almost the only option in Shanghai. Currently, the real estate market works this way in Shanghai:
- The government offer lands to the public. Typically, the land will be a very large area.
- The Real Estate Company Buy the Land from the government.
- The Real Estate Company build houses on the land and sell them. Typically, they are either high buildings (with 20 – 30 stories) in downtown or 10 – 11 stories in farther areas.
- The customers buy the houses and get the certificate of ownership.
So there is no separated house. Actually houses (one building with only one family living in it) are no longer allowed to be built within the outer ring road of Shanghai. The new apartment buildings have to be either 7-stories without elevator or higher with elevator.
So, several buildings will make up a community. The community is typically maintained by a Property Management Company. The Property Management Company charges people living in the community for their service (say, 1.95 RMB per sq. m per month)
It is the Seller’s Market
As I described in my previous blog Hard to Buy a House in Shanghai, it is absolutely a seller’s market. To be more precious, it is the investor’s market.
There is a very strange phenomena in Shanghai that people with money cannot get a chance to buy an apartment. This is out of everyone’s imagination – so wired.
When a real estate project is completed and open to market, buyers with cash in hand only find out that all the apartments have been sold out. After looking for bigger houses for some days, I am disappointed myself. If you hear about a place that sounds good, you don’t even need to bother to call their sales hotline. The answer will be: “Sorry. All the apartments have been sold out”.
What? All apartments have been sold out? It is astonishing to see the newly opened houses with at least 1000 apartments were sold out in two hours. Am I dreaming? Unfortunately, it is the reality of the market in Shanghai.
Currently, Medias in Shanghai begin to notice the phenomena. I have seen new apartments in Xuhui that they following the N-N-N policy: “No Price. No Reception. No Apartment.” They even don’t bother to talk to the end customers.
When I steps in to the sales office of a property in Yuanshen Rd. and Pudian Rd., I saw the even stranger notice. “Our apartment price is confidential. If you want to get noticed of the price, please pay 2000 RMB first.” Well. Well. Well. They asked me to pay 2000 RMB to know the price of their houses? Is this robbery?
When my friend said “The service I received to buy a house is worse than that I received to buy a cloth”, we all laughed out laud. True. Very True.
Where are the Houses
The big question in everyone’s brain is, WHERE ARE THE HOUSES?
The recently three years witness the blooming of the real estate industry. The price of houses in Shanghai doubled. The market strategy for real estate companies made the price for the house keep raising. For example, the property at Jinxiu Rd. rose from 6000 RMB per sq. m to 7200 RMB per sq. m in the last month (from Sept to Oct, 2003). So it is a good investment option to buy one or two apartments and sell it in one or two months. Now the magic Chinese “Relationship” or Guanxi come into play. If there are new houses, buyers will typically buy the houses using internal channels before they are released to the market. This is proved by the phenomena that second-hand new houses are available on Real Estate Agencies while the first hand new houses are not available from the Real Estate Developers.
I believe this is the typical economy bubble in the real estate industry. People buying the houses not for use, they just buy it for investment. When the majority of the buyers become investors, it is for sure the price will drop after they find out there are not enough buyers.
However, I do believe with more and more people moving to Shanghai – from worldwide or from country-wide, the demands for houses are still high. The prices will continue to rise after it drops for about one or two years.