Shanghai overtakes Shenzhen in real estate race

SHANGHAI has overtaken Shenzhen as the top city for real estate investment and development, driven by domestic demand and foreign funds, according to the latest Emerging Trends in Real Estate Asia Pacific 2018 report released on Friday.

The increase in transactions in Shanghai is being fueled by domestic buyers who are unable to export capital due to a regulatory crackdown and by foreign core funds flush with new capital they need to deploy.

Regionally, Shanghai ranked fourth for both investment and development prospects in 2018, up from this year's sixth and seventh spots, respectively, according to the report by the Urban Land Institute and PwC.

It is based on a survey of more than 600 real estate professionals, including investors, developers, property firm representatives, lenders, brokers and consultants.

Shenzhen finished at sixth in investment opportunities and fifth in development prospects. That compared to 2017 when it was ranked fifth for both investment and development prospects.

For the other two first-tier cities, Guangzhou finished eighth in investment and 10th in development while Beijing was ranked 11th and 17th, respectively.

"The Chinese government has stepped up its control of domestic capital outflows, which to some extent may allow a large amount of domestic funds originally devoted to international real estate investment to be redirected to domestic assets, resulting in the short supply in the domestic real estate market being further aggravated," said Nick Xu, PwC China Partner for the northern real estate market.

Sydney topped the list in both investment and development prospects.

The city's appeal lies in the fact that it is a major city in a mature economy combining a reasonably deep and liquid market of core assets with a better-than-average yield, the report said.