Shanghai's real estate market showing signs of recovery

Backed by combined policy support from central and local levels, Shanghai's real estate market has shown recovery signs, with industry experts expecting an across-the-board restoration in coming months.

"A series of positive changes were observed in the third quarter. In Shanghai's property market, demand for office leasing is driven by cost-effective requirements, recovery of retail leasing is mainly found in categories including affordable dining, sportswear, streetwear brands, local designers' brands and collectible toys stores, and residential properties are supported by stable demand from upgrade needs," said Yao Yao, head of research for JLL China.

Yao attributed the improved market activities to a number of supportive measures announced by the Chinese government benefiting various sectors including finance, consumption, investment, property, capital market, employment and people's livelihoods.

"The supportive measures will work together to greatly boost market confidence," Yao said.

Though most asset classes currently face a challenging short-term outlook, opportunities exist in all real estate segments, depending on entry price, location and market niche, according to James Macdonald, head of Savills Research China.

"The Shanghai residential sales market appears to have the best prospects, supported by substantial household equity, recent policy measures, pent-up demand and its relative security compared to other asset classes and regions," said Macdonald.

"Shopping centers, with their stable rental yields and potential for appreciation, are attracting a large number of investors and becoming the new favorite in the market, presenting opportunities for bargain hunting," said Shaun Brodie, head of research content on the China market at Cushman & Wakefield, a global real estate services firm.

Lu Yan, head of research with CBRE Eastern China, said that leasing demand for office and business parks is projected to see a moderate recovery in the fourth quarter, while outdoor sports and F&B (food and beverage) sectors are driving retail property demand.

"Despite short-term challenges in the office sector, recent government policies are expected to stimulate economic recovery and positively impact the market, but the full effects may take time to manifest, as these measures should support a long-term recovery in office demand, with improved leasing activity anticipated next year," Lu added.

According to Lu, in retail, to stimulate consumer sentiment and enhance consumption structure, Shanghai has intensified its promotional policies, issuing consumption vouchers for the four key sectors of dining, accommodation, film and sports at the end of the season. This policy support is expected to foster robust growth in the consumer market.

As for logistics, the government has introduced various policies to boost consumption, including subsidies for green and smart home appliances at the end of September. Shanghai also allocated 500 million yuan ($70 million) for the dining, accommodation, film and sports sectors. These measures are expected to enhance consumer market recovery, increase goods circulation and drive greater demand for warehousing space, added Lu.

"The Shanghai municipal government's measures in encouraging consumption will definitely bring positive changes in the retail property and support the sector's further recovery. In the meantime, the new measures introduced in home buying will effectively expand home demand and further boost market confidence," Yao said.

Both local governments and the central government are rolling out measures in line with the spirit of the Political Bureau of the Communist Party of China Central Committee meeting on Sept 26, which called to check the fall and stabilize the market.

Brodie believes the latest directive from the highest level regarding the current real estate market will stabilize market expectations.

"It will optimize the supply structure, improve the financing environment and promote a new model for real estate development," Brodie said.