Benchmark Study of Expatriate Housing Allowance--Shanghai

The luxury property leasing market of Shanghai kept a smooth trend in 2009, but in subdivided market the price of serviced apartment rose obviously. The leasing price of luxury apartment rose 1.2%; that of villa rose 0.9%; the serviced apartment rose 13.8%. 

Former French Concession   

French Concession area is the traditional noble living area of Shanghai. It is the most popular leasingarea in downtown for its cultural atmosphere and convenient traffics. Many famous luxury propertiesare located in this area including the La Cite, the Summit. The rental price in this area ranked highest in downtown Puxi. The prices of serviced apartment and luxury apartment in this area have risen 10.78% and 2.3% separatel.

Xu Jia Hui   

The rental prices of luxury apartment and serviced apartment in Xu Jia Hui have shown a steady rising trend. According to the data of Joanna Real Estate,the average rental price of luxury apartment in Xu Jia Hui reached 120.29yuan/square meter, and that of serviced apartment was 187.32 yuan/square meter. The prices of luxury apartment and serviced apartment have risen 2.5% and 10.6% separately compared with 2006.

Lu Jia Zui  

Lu Jia Zui area has become one of the most popular areas for expats in Shanghai. Many famous compounds such as Shi Mao Riviera Garden, Fortune Residence, Skyline Mansion and Marriott Executive Apartments are in this area. According to the data of Joanna Real Estate, the average rental price of luxury apartment and serviced apartment reached 110.7yuan/square meter and 259yuan/square meter (Marriott Executive Apartments and Ascott Pudong for sample) separately. That rise 4.7% and 7.3% separately compared with 2006.

Jin Qiao   

Jin Qiao area  includes  Jin  Qiao  International Community, Lianyang Community, Jinqiao Area and Century Park. This area is famous for its mature living facilities and good nature surroundings. Now Jin Qiao area is becoming the most popular living area for expats in Pudong. The rental price of luxury apartment, serviced apartment and villa in this area rise 2.8%, 8.4% and 1.3% separately.

Hongqiao Area 

Hongqiao Area is the earliest international community in Shanghai, the Gubei community in Hongqiao is called “Micro United Nations”. Last year,the average rental price of luxury apartment and villa has risen 3.0% and 5.9% separately.

Hu Qing Ping Area     

Hu  Qing  Ping  area  gathered  many  famous villa compounds. The comfortable nature living surroundings and mature living facilities make the villa compounds in Hu Qing Ping area the most popular  compounds  for  high  and  middle  level managers. The average rental price in this area has risen 5.1% compared with last year.

Other area  其他区域

Besides the areas above, Jing’an district is another popular area for expats. The One Park Avenue, Top of City in this area is keeping a high leasing rate. In 2009 the average price in Jing’an has risen 3%. Else, the Tomorrow Square and some villa in Songjiang District is also welcomed by some expats.

Considering  the  supply  limitation  of  luxury apartments in inner ring and villas, the effect of Olympic Game and Expo 2010, the vacancy rate of luxury property has a limitation for growth. Under the condition of a smooth demand from expatriates, the overall market will keep smooth. Considering the  supplement,  demand,  exchange  rate and inflation, we suggest enhance the housing budget by 10% to balance the effect from exchange rate and inflation.

Macro Economy Factor 

According to the recently published data by National Bureau of Statistics of China, the CPI of the first quarter is 8% which ranked highest in the recent ten years. The CPI of March is 8.3%, among that the dwelling price index rose 6.6% and the property sale price index rose 11.0%. The inflation pressure is further enlarged. While according to the data of Shanghai Municipal Statistics Bureau, the CPI of February rose 7.5% compared with last year. If compared with 2006, the CPI rose 8.59%.Under the pressure of inflation, the rental price will inevitably rise. In order to reduce the loss caused by inflation, the landlord will enhance the rental price.

Besides the inflation, the exchange rate between RMB and USD should also be taken into consideration.The exchange rate of RMB to USD was about 7.0, which means the RMB has appreciated by 10% since the exchange rate reform in 2005; compared with the beginning of 2007, RMB has appreciated by 6%. For expatriate employees, if their allowance at the beginning of 2007 was 10,000 dollars, now they have to pay extra 600 dollars in order to rent the same quality house.

Since  the  exchange  rate  reform,  RMB  had maintained  an  appreciation  pressure.  Because of the effect of Sub-prime Mortgage Crisis, U.S. Federal Reserve cut rate and continue to pursue the weak-dollar policy in order to stimulate the United States economy, which will make the exchange rate of USD to RMB continue to lower. According to the forecast of CCIG (China Capital Investment Group),RMB will appreciate 10% on the base of 2009. That means the Dollar-RMB exchange rate will come to 1:6.6 by the end of 2010.