Increased housing stock
This is not to say that finding a home in Beijing or Shanghai has become a pleasant experience. Quality problems persist and rents in both cities, despite having been falling for nearly three years, are still higher than in central London, for example, and the quality is also inferior.
Stock in both cities is far greater than four years ago and this has increased the number of options available in terms of type of accommodation and location. According to First Pacific Davies, stock in Beijing is now four tines what it was at the end of 1993 although, as the company points out, the greatest proportion of new supply is in the lower end of the market and is often poorly located. In Shanghai the story is similar, with the supply of new residential units in 1997 at 6,325 taking total stock to 35,000 anits. But as in Beijing, new housing isoften not of the type or in the areas that make it attractive to foreign tenants.
The types of housing available fall into broad two categories downtown apartments and suburban houses, usually referred to as villas in China. Universal Properties, a residential agency with a Shanghai website (www.shanghai-ed.com), divides the market into villas and family homes, serviced apartments and apartments, and bachelor pads. Villas are normally built in a secure compound, complete with garden, two to five bedrooms and a garage. They also have a range of facilities which typically include a clubhouse, tennis and squash courts, swimming pool, shuttle bus service, nursery school and convenience store. Some of the new developments in Shanghai even have a golf course on the doorstep. Downtown apartments are available in a variety of locations and prices in both cities and offer swimming pools, tennis courts, laundry, childcare and other amenities.
The importance of location
Location is an important issue. In Beijing the principal area for quality villas is along the airport expressway; `villa valley' includes prestige projects such as Riviera and Eurovillage. For apartments of all types, the most popular location is around Sanlitun where many expatriate haunts are to be found.
Shanghai villas can also be seen along the airport road although increasing num-bers of quality homes, such as The Four Seasons, are to be found in Pudong New Area. Apartments, on the other hand, are more scattered but the central district is the most popular, especially the area that was previously the French Concession. Expatriates of all ages often ask to be within walking distance of O'Malleys Irish Pub in the main consulate area.
For those with children of school age, choosing a home close to one of the International Schools is often the most important single factor in deciding where to live. Beijing now has many international schools, six in Chaoyang district alone, giving families plenty of choice. The three main schools in Shanghai have been in the western suburbs, more specifically in the Hongqiao and Gubei areas in Changning district. The Shanghai American School has two campus-es, both of which are housed in temporary sites; one is in Minhang district close to the airport and the second is in Pudong. New campuses are under construction close to both locations. Another new international school in Pudong is set to open in the residential area within Jinqiao export processing zone in September 1998 and this will open up the area to many more expatriates than have previously chosen to live in the area.
Living in local housing is a good way to save money and it can make life more interesting by allowing greater interaction with Chinese life. While living in local housing is not to everyone's taste, older flats and houses are becoming increasingly attractive to a small band of expatriates. If the thought of sharing bathroom and kitchen facilities with 10 Chinese families does not appeal, fear not: it is illegal for foreigners to occupy this kind of state-owned housing.
The local alternative
The local housing market is split into that owned by the state and commodity housing, which is property for locals to buy on the open market. Technically it is not permitted for foreigners to live in either type but the authorities tend to turn a blind eye to foreigners in commodity housing developments. Clampdowns do take place periodically in Beijing but in Shanghai things are more relaxed. In any case it is a sensible pre-caution to include a clause in the contract stating that, if the authorities kick you out, you have the right of early termination and a deposit refund. It helps to get your local police station to approve of the arrangements and a canny landlord can help get the necessary stamp on your lease with the aid of a bottle of whisky and a carton of cigarettes.
The thought of buying a house or apartment in China does not even cross the minds of most expatriates, but it could make sense as the market matures and new developments of improved quality become avail-able. Average payback periods are eight years in both cities and for the increasing number of expatriates staying longer than three years or so, buying may now make more sense than paying money to a landlord or developer.
Selling the property
Apart from the difficulty of choosing from a bewildering array of developments, the main problem with buying in China is the later resale of the property. The secondary markets' remains very limited and the problems of managing a property in China from home could prove a headache in later years. Other drawbacks with buying include tax and legal issues, neither of which are insurmountable. With the rapid pace of development, some buyers have found elevated highways being built outside their living room windows with no prospect of compensation. Capital gains have been rare during recent times, but for those who do decide to buy, the best way to retain value seems to be aiming for quality of location, construction and finish.
Almost without exception in China, the cost of housing foreign staff is paid for by employers either directly to the landlord or in the form of an allowance which is added to the overall salary package. The allowance will determine the all-important budget and consequently the type of housing an individual or family is able to rent.
According to Universal Properties, rents for expatriate housing in Shanghai have fall-en by 50 per cent on average in the last four years. In reality, rents for many properties have been stable while others have fallen by far more than 50 per cent. Beijing has seen similar falls and rents for serviced apartments have been plummeting since the end of 1996.
For villas, unit sizes range from 125 sq metres to 730 sq metres, with the most common sizes between 200 and 350 sq metres. In Beijing and Shanghai, monthly villa rents are in the range of US$20-40 a sq metre. Villas in less popular locations, such as Pudong in Shanghai and beyond Beijing Airport, are generally available at rents 20 to 30 per cent lower than the more popular projects in more appealing locations.
The Shanghai Centre contains the most popular serviced apartments in Shanghai but turnover of tenants usually means there is something available. The closest equivalentin Beijing is probably the Lido Holiday Inn serviced apartments. Units in the Shanghai Centre range from 35 sq metre studios which rent for US$2,500 a month to 175 sq metres which rent for more than US$12,000. In the Lido, units in the new block completed in October 1997 provide serviced apartments ranging in size from 54 to 90 sq metres at monthly rents of US$70 per sq metre. This type of service apartment unit is especially popular with multinational corporations such as IBM, Motorola and Siemens.
Other serviced apartment projects in Beijing and Shanghai are around US$4,000-5,000 a month for a two- or three-bedroom unit. These are often whole blocks which have been bought by a single investor and deco-rated and furnished to target the top end of the market, rather than purpose-built serviced apartment projects similar to those that may be found in Hong Kong or Singapore. Mid-level housing budgets of expatriates in Beijing typically range from US$4,500 to US$7,000 a month and projects such as Capital Mansions and Estoril Court fall into this price range.
Popular mid-range apartments in Shanghai include Shangmira Gardens, Zhonghui Gardens, Haihua Gardens and Fortune Gar-dens in Pudong. All these projects have swimming pools and other facilities avail-able for tenants and they are also close to shopping outlets. Cheung Fat Gardens leas-es for US$30 per sq metre a month and flats in Maosheng Mansion in Jingan District are 140 to 220 sq metres in size and lease for US$4,000 to 5,500 a month.
The bottom of the residential market in Shanghai starts at around US$1,000 a month, but this will get an old, poor quality flat in a block without lifts, in a less desirable location and with little in the way of services. Shanghai's Gubei New Area, near the airport, has a large amount of available stock in the lower rent bracket and some of the developments are of reasonable standard. Rents of US$1,500 to US$4,000 a month will secure an apartment of decent standard. Asia Games Village is Beijing's main supply of cheaper housing. There are several blocks to choose from but rents of around US$30 per sq metre a month seem quite high considering the relatively poor quality.
After half and hour of conversation in any bar frequented by expatriates in Beijing or Shanghai, it is clear that housing is a topic close to the heart of many foreign residents. Problems range from noisy neighbours, col Rents in Beijing and Shanghai residential developments US$ per square metre per month plain about areas that are too quiet, but for foreigners it can be quite stressful.?
There is little that any developer can do about external noise and local characteristics. However when choosing a home, check for sound insulation and try to visit the surrounding area at different times of the day. Early mornings can be noisy if there is a street market nearby and any pubs or night clubs will attract the inevitable hooting taxi queues into the small hours. Villas in the stunning grounds of Xingguo Guesthouse in Shanghai may appear to be in an oasis of calm but residents complain of construction noise from within the grounds and guards talking loudly as they do their nightly rounds. At weekends the hotel is used for wedding ceremonies, attracting locals who think nothing of peering through the windows to see the relative luxury of a foreigner's home.
Knowledge of the market is all important. There are plenty of estate agencies in both cities which publish regular materials. More detailed research can be obtained from the international agencies such as Jones Lang lapsing ceilings and flooding basements to management that, in the words of one Shanghai-based analyst, often appears to be little more than a cleaner pushing a puddle of dirty water around the floor with a filthy mop.
The Shanghai Symphony
The insulation in some apartment blocks can be so bad that residents complain about being' able to hear neighbours walking around in slippers in the flat above. Living in a bustling Asian city is bound to be noisy but many would draw the line at late night karaoke sessions. Mr Sam Crispin, associate director at First Pacific Davies in Shanghai, says of noise in the city, the Shanghai Symphony consists of hooting cars, thudding pile drivers, bicycle bells and the wail of police cars. Locals hold friendly conversations that sound more like shouting matches than an exchange of pleasantries. The din seems to permeate every corner of the city. Locals seem to feel at home with the constant background of this noise and have been known to com-
Wootton, Colliers Jardine, First Pacific Davies and Brooke Hillier Parker and it is now possible to get information on Shanghai property over the internet. Even if you do not intend to use the services of an agent, which are now usually free for tenants, they will usually be happy to provide you with market information. Using an agent makes the process of settling into a new home easier but there are dangers in signing a lease with a landlord who has a special agreement with an agent, because they may not always have the tenants interests at heart. If in doubt, get a second opinion from another agent; most will be happy to help. Above all for those newly arrived in an unfamiliar city, it pays take your time and talk to people who have been through the process themselves.
Traffic in Shanghai has eased considerably in recent years and is no longer much of a problem. In Beijing on the other hand, higher levels of private car ownership mean that the roads are very crowded, so it is worth paying attention to rush hour journey' times.
Getting a second opinion
Beware of committing to housing that is still under construction. A scheduled completion date does not necessarily mean that a development is ready to be inhabited. Continuing construction and decoration works can cause disruption for months after moving in. Shanghai Links in Pudong, being built by the Sealand Housing Corporation, is supposed to be the ultimate in quality housing in China, but no one knows if this development will be any different from all the others because the houses haven't yet been finished, the project being more than one year behind schedule. Generally it is best to stick to developments that are already finished or seek protection in the contract.
Most companies give help to expatriates newly arrived in China and many have a relationship with an agency; check about this before leaving home and get some examples sent over. The agent should be able to provide a range of housing to suit different budgets, provide transportation and accompany clients to each one and negotiate on their behalf. Many will try to do little more than make the introduction, so it's worth asking around for a reputable company that provides some kind of `after sales service'.
The final word must go to the Australian family, who decided the only way to find a home in Shanghai that met their needs was to lease some land and build their own house. This may be a bit extreme for the expatriate but it's a great place for a barbecue.
Natural gas potential
Industrial zones in Hainan remain sparsely occupied. In the early years the SEZ's preferential policies attracted processing factories. The foreign-invested Hong Kong and Macau International Zone, a bonded area 20km from Haikou, contained many Taiwanese shoe factories, as well as the German lingerie manufacturer Triumph International. Now, Triumph is one of the few companies remaining in the zone, which businessmen say is neglected by the provincial government.
The Jinpan Industrial Development Zone, also in Haikou, fares little better, attracting only a few assembly plants, including one for Mazda cars, as well as Asia Pacific Breweries. But Zhai prefers to point to more stable economic indicators. In 10 years, industrial output has grown by an average of 16.2 per cent a year, and agriculture by 8.2 per cent.
The most significant potential for industry is natural gas, though the island is also rich in iron ore and other minerals. Gas from the Ya 13-1 field, which has a reserve of 90.79bn cubic metres, is now being pumped ashore and to Hong Kong. The cent, still below the national average, and is forecast to reach eight per cent this year. But recovery is now hampered by the Asian economic crisis, which is hitting foreign investment and exports.
With Asian regions, including Hong Kong, Taiwan, Singapore and Japan, among its major investors, foreign investment is expected to fall in 1998 and 1999. Hong Kong accounts for 47 per cent of foreign funds.
With a population of just 7.43 million, Hainan has difficulty competing for consumer goods investment with mainland cities closer to major centres of population. Hainan Asia Pacific Breweries, the island's only brewery, has found it must ship half its output to the mainland, the local market being so small. The Hainan Meinan Power Company, a US-Singaporean joint venture, is operating at just 30 per cent capacity because Hainan has a surplus of electricity. Unlike the beer factory, it cannot sell its surplus elsewhere in China. The Hainan government has chosen to buy most of its electricity from state-owned plants.
Even Hainan's notorious entertainment business has suffered from the slump. Many big-name restaurants have closed. There used to be around 500 karaoke lounges in Haikou, but today there are fewer than 30.