All sectors of Shanghai's property leasing market were active to varying degrees in the third quarter of 2004 with occupancy rates among villas, service apartments and high-tier non-serviced apartments all reaching the highest level since 1998, according to the quarterly real estate report released last week by DTZ Debenham Tie Leung, a firm of international property advisers.

Shanghai's villa market experienced consistent increasing occupancy rates and rental levels as a result of strong demand. The average occupancy rate climbed 0.7 percentage points from 90.64 per cent to 91.32 per cent, also a six-year high.

The average rental for the sector climbed 7.8 percentage points over the previous quarter to US$21.93 per square metre per month.

The average rental of serviced apartments has stayed at between US$20 and US$22 per square metre per month for the past two years. But average rents have now broken through US$24, an increase of 11 per cent over last quarter.

The non-serviced apartment sector also experienced strong demand in the third quarter, resulting in increased occupancy and rents. The occupancy rate for the sector climbed 1.22 percentage points from 89.9 per cent to 91.12 per cent, while average rental increased marginally by 1.6 per cent from US$12.2 to US$12.4 per square metre per month.

As a result of land limitations, the poor quality of old properties and more multinational companies relocating their regional headquarters to Shanghai, the average rental of serviced apartments has increased by US$300 per unit per month over the past year.

In the luxury residential market, trade volume in September had a significant increase over the previous two months, benefiting from demand from foreign students who study in Shanghai. The occupancy rate in Pudong measured 86 per cent, while in Puxi it achieved 93 per cent.

In the quarter, with the recent implementation of some government policies, the prices of some high-quality properties have been increasing.

According to the Shanghai Real Estate Trading Centre, real estate investment increased 20.53 per cent to 50.3 billion yuan (US$6.07 billion) in the first half of 2004. The real estate area approved for pre-sale decreased by 15.77 per cent to 11.01 million square metres and the total residential area approved for pre-sale decreased by 16.7 per cent to 8.74 million square metres in same period.

At the same time, the real estate area sold for pre-sale increased by 15.35 per cent to 14.7 million square metres, and total residential area sold for pre-sale increased 6.57 per cent to 13.15 million square metres.

Among all residential projects sold in this quarter in Shanghai, 79.49 per cent were priced between 7,000 (US$845.41) and 10,000 yuan (US$1,207.73) per square metre.

It is expected that more high-end properties will be introduced to the market in 2005 and 2006 with an average price of 15,000 yuan (US$1,811.59) per square metre. With the completion of a number of high quality properties, the overall level of rentals is expected to climb whereas the older and poorer quality properties have gradually been eliminated, according to the DTZ report.

In the sales market, the administration has introduced many macro-adjusting policies to the real estate market, forcing many developers to postpone their projects and taken a wait-and-see approach. This will result in a drop in the housing supply in the near future.

(China Daily November 2, 2004)