Page 202 - 2020 White Paper on the Business Environment in China
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0 White Paper on the Business Environment in China
return rate, conflicts with tenants, and the lack of a prices for residential properties in Shenzhen stood
regulatory system are factors that are discouraging at 71.4 yuan ($10.30) per square meter per month
property enterprises from the business. Compared in June 2019, —down 0.02 percent compared with
with 2017 when industry players were enthusiastic a month earlier. The government needs to do
about the topic, they are now taking a more- more in terms of policymaking. It should establish
cautious attitude toward the development of rental a comprehensive, detailed and authoritative policy
housing in villages-in-city. system for guiding its development. Strengthened
management regulations should be set up to
Real-estate enterprises were given government keep rental prices at a reasonable level (Zhou,
subsidies to develop the market, but at the Shenzhen’s).
same time they had to meet other government
requirements. Enterprises had no idea of how the Asset Management
situation would be when they first started. After
these three years of operation, some disadvantages Property management doesn’t just end with
have begun to emerge, and some businesses have daily maintenance. There’s a later evolution into
come to realize that it is not a profitable business. asset management on the Chinese mainland. It’s
The low rate of return is a problem. The financing especially important for owners of high-end office
rate for long-term rental business is normally properties, an industry expert observed. It’s only
above 5 percent, but the return rate for long-term within the past five or six years that the concept of
rental apartments is only 1 to 3 percent, and below real estate asset management became an important
2 percent in first-tier cities. When the units come part of the property sector in Shenzhen, Guangdong
into the market again after renovation, they have province. The trend to change the business model
a higher rental price, which increases the financial came about when large developers hit hard times.
burden on tenants. The housing shortage has long Their high-end properties weren’t selling, so they
been an acute problem in Shenzhen. The southern replaced the old build-and-sell model and started to
metropolis, with an area of less than 2,000 square hold on to newly completed properties. Experience
kilometers, is only one-eighth the size of Beijing soon revealed that by retaining properties, the
and one-fourth that of nearby Guangzhou. Land for developers could increase their profits. Developers
housing development is very limited. Meanwhile, realized that they could maximize the profits by
Shenzhen’s population has kept growing every adopting the asset management approach. Grade
year. According to government statistics, the A commercial properties in prime locations are
city’s population surged by about 620,000 in 2017 hard to get and long-term investment in a property
compared with the previous year. Many newcomers can bring a higher return on investment than
are young people who want to buy a home. The strata sales. The new strategy aims at long-term
imbalance of supply and demand is considered gain on assets. For example, one aspect of asset
a key reason why Shenzhen’s home prices have management is to assemble a premium tenant
seen considerable growth in the past few years. mix, which is sustainable and attractive to new
The Shenzhen government has introduced various tenants. Some building owners on the mainland
measures to ease the problem, such as increasing were eager to disregard selective leasing. Buildings
the number of rental homes in the city. The aim is ended up half vacant after one or two years, as
to divert part of the buying demand to the rental some tenants shuttered operations. The market
side. In a guideline launched in August 2017, the for real estate asset management has emerged
government said no fewer than 1 million units of on the mainland. Big property owners, however,
homes and rooms in Shenzhen’s villages-in-city can’t find enough qualified managers. The
should be developed or renovated for renting competition for asset managers has intensified
by 2020. A number of property enterprises have as foreign investors join the market. International
flocked in, eager to get a slice of the pie in a market investment funds are moving into the market in a
that they believe has high potential of growth. big way, in search of real estate projects. According
Despite the challenges facing the industry, the to the 2019 real estate market outlook issued by
overall direction of developing the rental housing the consultancy firm CBRE, overseas investment
market should be maintained. The average rental in the Chinese mainland’s en bloc commercial
202
return rate, conflicts with tenants, and the lack of a prices for residential properties in Shenzhen stood
regulatory system are factors that are discouraging at 71.4 yuan ($10.30) per square meter per month
property enterprises from the business. Compared in June 2019, —down 0.02 percent compared with
with 2017 when industry players were enthusiastic a month earlier. The government needs to do
about the topic, they are now taking a more- more in terms of policymaking. It should establish
cautious attitude toward the development of rental a comprehensive, detailed and authoritative policy
housing in villages-in-city. system for guiding its development. Strengthened
management regulations should be set up to
Real-estate enterprises were given government keep rental prices at a reasonable level (Zhou,
subsidies to develop the market, but at the Shenzhen’s).
same time they had to meet other government
requirements. Enterprises had no idea of how the Asset Management
situation would be when they first started. After
these three years of operation, some disadvantages Property management doesn’t just end with
have begun to emerge, and some businesses have daily maintenance. There’s a later evolution into
come to realize that it is not a profitable business. asset management on the Chinese mainland. It’s
The low rate of return is a problem. The financing especially important for owners of high-end office
rate for long-term rental business is normally properties, an industry expert observed. It’s only
above 5 percent, but the return rate for long-term within the past five or six years that the concept of
rental apartments is only 1 to 3 percent, and below real estate asset management became an important
2 percent in first-tier cities. When the units come part of the property sector in Shenzhen, Guangdong
into the market again after renovation, they have province. The trend to change the business model
a higher rental price, which increases the financial came about when large developers hit hard times.
burden on tenants. The housing shortage has long Their high-end properties weren’t selling, so they
been an acute problem in Shenzhen. The southern replaced the old build-and-sell model and started to
metropolis, with an area of less than 2,000 square hold on to newly completed properties. Experience
kilometers, is only one-eighth the size of Beijing soon revealed that by retaining properties, the
and one-fourth that of nearby Guangzhou. Land for developers could increase their profits. Developers
housing development is very limited. Meanwhile, realized that they could maximize the profits by
Shenzhen’s population has kept growing every adopting the asset management approach. Grade
year. According to government statistics, the A commercial properties in prime locations are
city’s population surged by about 620,000 in 2017 hard to get and long-term investment in a property
compared with the previous year. Many newcomers can bring a higher return on investment than
are young people who want to buy a home. The strata sales. The new strategy aims at long-term
imbalance of supply and demand is considered gain on assets. For example, one aspect of asset
a key reason why Shenzhen’s home prices have management is to assemble a premium tenant
seen considerable growth in the past few years. mix, which is sustainable and attractive to new
The Shenzhen government has introduced various tenants. Some building owners on the mainland
measures to ease the problem, such as increasing were eager to disregard selective leasing. Buildings
the number of rental homes in the city. The aim is ended up half vacant after one or two years, as
to divert part of the buying demand to the rental some tenants shuttered operations. The market
side. In a guideline launched in August 2017, the for real estate asset management has emerged
government said no fewer than 1 million units of on the mainland. Big property owners, however,
homes and rooms in Shenzhen’s villages-in-city can’t find enough qualified managers. The
should be developed or renovated for renting competition for asset managers has intensified
by 2020. A number of property enterprises have as foreign investors join the market. International
flocked in, eager to get a slice of the pie in a market investment funds are moving into the market in a
that they believe has high potential of growth. big way, in search of real estate projects. According
Despite the challenges facing the industry, the to the 2019 real estate market outlook issued by
overall direction of developing the rental housing the consultancy firm CBRE, overseas investment
market should be maintained. The average rental in the Chinese mainland’s en bloc commercial
202
