Shanghai and Beijing in lead as property investment regains vibrancy

China's real estate investment market continued to regain its vibrancy in the first half of this year, with Beijing and Shanghai leading the rebound, international property consultancy Cushman & Wakefield said in its latest research report.

In the first six months of 2021, 95 en bloc deals valued at a total of 88 billion yuan (US$13.59 billion) were completed across the country, a decrease of 18 percent from the second half of 2020. 

However, Beijing and Shanghai, which are the country's two largest real estate investment markets, registered transactions valued at 30.3 billion yuan and 29.4 billion yuan each, an increase of 22 percent and 19 percent from the previous six-month period.

Notably, Beijing continued to outplay Shanghai. During the second half of 2020, the capital city surpassed Shanghai for the first time in terms of transaction value involving en bloc property deals.

"Amid gradually subsiding negative impact from the COVID-19 pandemic, institutional buyers are returning to the real estate investment market on the Chinese mainland as they spent 58.2 billion yuan around the country during the first half, accounting for 66 percent of the total," said Alvin Yip, Cushman & Wakefield's China president of capital markets. 

"Shanghai, in particular, remained the most popular among overseas investors."

Between January and June, overseas investors spent about 11.1 billion yuan in purchasing real estate projects in Shanghai, or 52 percent of the total they spent in China, according to Cushman & Wakefield data.

By property type, office projects remained the most attractive among investors in the first half, grabbing a 52 percent market share. They were most closely trailed by mixed-use development and retail property, each accounting for 17 percent and 11 percent.

A separate report released earlier by global property consultancy JLL showed that China led the recovery in Asia Pacific's hotel investment market in the first half of 2021, with deal volume rising 54 percent year on year to US$1.3 billion, and themes involving conversion of serviced apartments for strata sale, and sale of older hotels for conversion to alternative use.

Shanghai continued to be the top investment destination, with sales volume accounting for one-third of the country's total.

"Driven by China's new 'three red lines' policies, there will be a wave of hotel sales for cash-strapped developers looking to improve their balance sheets through the divestment of non-core assets," said Zhou Tao, managing director and head of hotels & hospitality group for JLL China. 

"Three red lines" refer to the regulated ceilings set by the central bank on homebuilders' debt based on three leverage thresholds – the ratio of total liabilities to total assets below 70 percent, net debt less than shareholders' equity and available cash higher than short-term debt. 

"We predict that transaction volume will exceed US$2 billion in China in 2021, which is back to pre-pandemic levels."