Contents: 02 Data & Views. 22 Industry Focus. 26 In-Depth Observation. 38 News Guidance URBAN VIEW -1-

Transcription

1 Contents: 02 Data & Views Macro Economy Urban Data - Shanghai Inventory Residential Price Index Urban Analysis - Real Estate Market Costs of Building Materials & Construction 22 Industry Focus Wanda Theme Park vs. Disney Park 26 In-Depth Observation Tapping the Potential of Inventories Evolution of Shanghai s Urban Renewal 38 News Guidance Policy & Regulation Real Estate Finance Market Highlights 2016 Issue No. 5 Hosted by: Urban Surveyors - Shanghai Urban Real Estate Appraisal Co., Ltd. (SUREA) Chief Editors: Yuan Donghua, Wang Changhua Deputy Editors-in-Chief: He Jian, Zhuyu Executive Editor: Qin Yun Associate Editors: Shao Minghao, Huang Haisheng, Jiang Qimin, Lin Feng Editors: Lin Jingjun, Ren Chenying, Shi Jian, Mi Huiying Art Editor: Zhang Tao Address: 15-18F New Golden Bridge Plaza, No. 1 West Beijing Road, Shanghai Postcode: Website: surea@surea.com Tel: URBAN VIEW -1-

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3 Macro Economy Trend of CPI&PPI, Jan 2014~June 2016 Growth of Shanghai Real Estate Loans, Jan 2014~May 2016 x RMB million Growth of real estate development loans Growth of personal housing loans CPI (June) Category YoY % MoM % CPI Food Tobacco, liquor and articles Clothing Household appliances and maintenance services Health care and personal articles Transportation and communication Recreation, education, culture articles and services Residence PPI (June) Category YoY % MoM % PPI Means of production Mining industry Material industry Process industry Means of livelihood Food Clothing Articles for daily use Durable consumer goods URBAN VIEW -3-

4 Urban Data - Shanghai Inventory Residential Price Index 1. The inventory residential housing market was stabilizing. Shanghai Inventory Residential Price Index reached in June 2016, a MoM growth of 1.21% and a YoY rise of 38.61%. On 23 rd June, the Ministry of Land and Resources issued Adjustment Plan of the Outline of the National Overall Planning on Land Use ( ). The planned total of Shanghai s The city s index increase over the past three months Month Index MoM Increase % % % construction land in 2020 was adjusted from 298,100 hectares to 320,000 hectares. However, this does not mean the increase of construction land. The scarcity of construction land still exists in Shanghai. The major developers are crazy about purchasing land. With the continuous boom of sizzling land market, the current stabilization of home price may be just short-term. URBAN VIEW -4-

5 2. Price index between the Middle and Outer Ring Roads rose by 1.51% in this month. The high price within the Inner Ring Road further reduced the growth of price index in this area to 0.87%. The housing demand continued moving outwards. The area between the Middle and Within IR % Between IR and MR % Between MR and OR % Between OR and SR % Outside SR % Outer Ring Roads saw the largest increase in price index in this month, namely 1.51%. 3. Only 8 sections saw increases over 2%. Zhongyuan Section took the first place by 2.83%. In June 2016, all the sections saw different increases in price index, among which only 8 sections saw growth over 2%, 13 fewer than the number in last month. Zhujing Section slightly fell by 0.04%. URBAN VIEW -5-

6 Urban Analysis Land Market 1. Supply 1) Overall Supply Trend of Land Supply ha. 15/06 15/07 15/08 15/09 15/10 15/11 15/12 16/01 16/02 16/03 16/04 16/05 16/06 Business-oriented land Industrial land In June, the listing volume of business-oriented land saw a stable rise to 59 hectares, up 3.6% MoM. The supply of industrial land significantly rebounded to 12.4 hectares, surging by 225.7% MoM. 2) Supply of Business-oriented Land by Type 160 Supply of Business-oriented Land by Type ha. 0 15/06 15/07 15/08 15/09 15/10 15/11 15/12 16/01 16/02 16/03 16/04 16/05 16/06 Commodity residential land Retail/office land Affordable housing land Mixed-use land (incl. residential use) By type, commodity housing land remained the main part of business-oriented land supply, increasing to 36.5 hectares. The supply of affordable housing land was the second highest, namely 9.5 hectares. 7.7 hectares of retail/office land and 5.4 hectares of mixed-use land (incl. residential use) were supplied. URBAN VIEW -6-

7 2. Transaction Volume 1) Overall Transaction Volume ha. Trend of Land Transaction Volume 15/06 15/07 15/08 15/09 15/10 15/11 15/12 16/01 16/02 16/03 16/04 16/05 16/06 Business-oriented land Industrial land The overall transaction volume of business-oriented land slightly declined to 47.9 hectares, still at the high level of this year. The transaction volume of industrial land surged to 12.4 hectares, supported by the rebound of its supply. 2) Transaction Volume of Business-oriented Land by Type Transaction Volume of Business-oriented Land by Type ha. 15/06 15/07 15/08 15/09 15/10 15/11 15/12 16/01 16/02 16/03 16/04 16/05 16/06 Commodity residential land Retail/office land Affordable housing land Mixed-use land (incl. residential use) By type, the transaction volume of commodity residential land remained the mainstay of business-oriented land transaction, slightly falling to 27.8 hectares. There were 10.6 hectares of mixed-use land (incl. residential use) and 9.5 hectares of affordable housing land transacted. There was no retail/office land traded in this month. URBAN VIEW -7-

8 3. Transaction Price Average Transaction Price of Business-oriented Land RMB/sqm 15/06 15/07 15/08 15/09 15/10 15/11 15/12 16/01 16/02 16/03 16/04 16/05 16/06 Business-oriented land Retail/office land Commodity residential land Mixed-use land (incl. residential use) 6000 Average Transaction Price of Industrial Land RMB/sqm 15/06 15/07 15/08 15/09 15/10 15/11 15/12 16/01 16/02 16/03 16/04 16/05 16/06 Industrial land In June 2016, driven by commodity residential land and mixed use land (incl. residential use), the average transaction price of business-oriented land jumped to RMB 39,950/sqm. The average transaction price of industrial land rebounded to RMB 1,225/sqm, boosted by the land parcels for scientific research & design purposes in Jiading and Lingang. URBAN VIEW -8-

9 Urban Analysis New Residential Market 1. Supply and Demand, Transaction Volume and Price sqm 250 Monthly Supply & Demand for Commodity Housing x Supply area Transaction area RMB/sqm 38,000 36,000 34,000 32,000 30,000 28,000 26,000 24,000 22,000 20,000 Average Transaction Price of Commodity Housing MoM YoY Average transaction price % In June 2016, the city s new commodity residential supply totaled 729,600 sqm, a MoM decrease of 42.63% and a YoY decline of 7.22%; the transaction area totaled 1,249,100 sqm, up 26.23% MoM and down 16.11% YoY. Because of the significant decrease of supply, the supply-demand ratio was only 0.58 in this month. The transaction prices averaged RMB 36,646/sqm, dropping by 0.27% MoM and rising by 7.18% YoY. URBAN VIEW -9-

10 2. Hot Sections Top 10 sections in terms of commodity residential transaction volume across the city in June 2016 Rank Section Transaction Transaction Average Transaction Supply Area Amount Area Price (sqm) (RMB 100 (sqm) (RMB/sqm) million) 1 Jiading New Town 95, ,378 27, Jinshan New Town - 63,305 12, Nanqiao - 59,544 26, Qingpu Town 19,666 54,576 29, Songjiang New Town 2,142 53,550 28, Zhujiajiao 30,800 43,877 20, Huinan 89,678 40,214 25, Huangdu 15,391 33,307 26, Fengcheng 28,434 32,692 15, Lingang New Town - 32,536 17, Top 10 projects in terms of commodity residential transaction volume across the city in June 2016 Average Transaction Ran Transaction Project Name District Section Area k Price (sqm) (RMB/sqm) 1 Vanke Anting New Town Jiading Jiading New Town 28,349 26,410 2 Tomson Ginkgo Garden Fengxian Nanqiao 26,086 27,529 3 Megahall MOMA Minhang Jiangchuan Zizhu 23,442 36,674 4 Jinyu Dacheng Jiading Jiading New Town 22,876 25,424 5 Rui Hong Xin Cheng Hongkou Sichuan Rd. (N), Siping Rd. 22,136 91,592 6 R City Phase II Jiading Huangdu 18,863 25,132 7 Ocean Seasons Nanhui Huinan 18,760 22,944 8 Flower Garden Fengxian Haiwan 17,089 12,561 9 Daning Jinmao Palace Zhabei Daning 16,734 88, Elite Mansion Jinshan Jinshan New Town 16,693 13,181 URBAN VIEW -10-

11 3. Hot New Supply Top 10 projects in terms of new commodity residential supply across the city in June 2016 Rank Project Name District Section New Supply Area (sqm) 1 The Mansion Xuhui Kangjian, Tianlin 52,866 2 Rui Hong Xin Cheng Hongkou Sichuan Rd. (N), Siping Rd. 39,658 3 Country Garden Jia Yu Jiading Xibeiqu 38,495 4 The Future Town Fengxian Jinhui 37,069 5 Gemdale Cloud Villa Baoshan Gucun 35,579 6 Oasis Vista Gardens Jiading Xibeiqu 34,468 7 Fontainebleau Jinshan Fengjing Town 34,137 8 Huinan Yi Fang Xin Cheng Nanhui Huinan 33,604 9 The Bustling Center Jiading Jiading New Town 32, Vanke Anting New Town Jiading Jiading New Town 32, Transaction Structure Transaction Structure of Commodity Housing by Area, May 2016 Transaction Structure of Commodity Housing by Total Price, May % above 300 2% below 70 5% above 5m 25% below 1m 3% 100~150 11% % % 150~200 13% % 400~500 11% 300~400 14% 200~300 23% % % Transaction Structure of Commodity Housing by Area, June % above 300 2% below 70 6% % 400~500 8% Transaction Structure of Commodity Housing by Total Price, June 2016 above 5m 23% below 1m 5% 100~150 9% 150~200 13% 300~400 17% 200~300 25% m = million URBAN VIEW -11-

12 By area, in June, the proportion of properties with an area of sqm saw a significant growth of 1.63 percentage points. The proportion of properties with an area of sqm fell by 1.12 percentage points. Accordingly, by total price, the proportions of properties priced RMB 2-4 million greatly increased by 5.14 percentage points. The proportions of properties priced over RMB 4 million declined by 5.21 percentage points in total. 5. Inventory Change Units Change of Shanghai Residential Inventory, June 2014~June Jun Oct Feb June Oct Feb June As of end-june 2016, the city s first-hand residential inventories totaled 58,300 units, down 3,618 units MoM. The digesting period of inventories shortened to only 4.5 months. URBAN VIEW -12-

13 Urban Analysis Second-hand Residential Market 1. Transaction Volume and Price Transaction Volume and Price of Second-hand Housing 60,000 30,000 50,000 40,000 30,000 20,000 10,000 28,000 26,000 24,000 22,000 0 Units Transaction volume (unit) Average transaction price (RMB/ m2 ) 20,000 RMB/m 2 In June, the city s second-hand residential transaction volume totaled 25,724 units, increasing by 27.84% MoM and decreasing by 23.26% YoY; the average price signed on the Internet was RMB 28,787/sqm, up 4.71% MoM and 14.93% YoY. 2. Transaction Volume by District Units 4,000 3,500 3,000 2,500 2,000 1,500 1, Transaction Volume of Second-hand Residential Housing by District, May vs June 2016 Average MoM Growth 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% % % Zhabei Yangpu Xuhui Songjiang Qingpu Putuo Pudong Nanhui Minhang Luwan Jinshan Jiading Jing'an Huangpu Hongkou Fengxian Chongming Changning Baoshan May June MoM By district, 18 of the 19 districts in Shanghai saw MoM increase ranging from 1.10% to 57.59% in transaction volume in June. Only Huangpu District saw a decrease of 13.10%. Jiading saw the largest growth of monthly transaction volume, namely, 57.59%. URBAN VIEW -13-

14 3. Hot Sections Top 10 sections in terms of MoM increase in secondhand residential transaction volume in June 2016 Rank District Section No. of Units Transacted MoM YoY 1 Changning Gubei % % 2 Jiading Jiading Main Urban Area % 27.14% 3 Jiading Nanxiang % 28.73% 4 Nanhui Xinchang % 34.43% 5 Pudong Caolu % -8.38% 6 Jing an West Nanjing Road % % 7 Putuo Changshou % % 8 Songjiang Songjiang New Town East Area % 12.88% 9 Putuo Changzheng % % 10 Jing an Caojiadu % % 4. VISS Base Price According to the statistics of VISS system, in June 2016, the city s mean of residential quarters was RMB 42,537/sqm, up 1.15% Mean Median MoM and 40.38% YoY; the city s median of residential quarters was RMB 43,317/sqm, up 1.49% MoM and 39.73% YoY. 2.50% MoM Change of Base Price by District, May vs June % 1.50% 1.00% 0.50% 0.00% BS CN CM FX HK HP JA JD JS LW MH NH PD PT QP SJ XH YP ZB May % 1.64% 0.46% 1.22% 0.95% 1.29% 0.93% 1.15% 0.58% 1.41% 0.76% 2.09% 1.37% 1.65% 0.97% 1% 1.65% 0.98% 1.81% June % 1.67% 0.92% 1.12% 0.69% 1.03% 0.82% 1.47% 0.17% 1.33% 1.14% 1.36% 0.89% 1.73% 0.68% 1.08% 1.18% 0.96% 1.59% URBAN VIEW -14-

15 From the view of regional base prices on a monthly basis, in June, all the districts saw increases ranging from 0.17% to 1.73%, a little lower than last month. By section, in June, only 2 of the 121 sections saw slight drop of base price. 12 sections saw growth over 2%, 6 fewer than the number in last month. Top 5 sections in terms of increase Top 5 sections in terms of decrease Jinhui % Middle Jinshan % Gucun % Zhujing % Changxing Island % Zhongyuan % Xijiao % 5. Transaction Structure Transaction Structure of Second-hand Housing by Total Price, May m~5m 7.30% 2m~3.3m 26.73% above 5m 7.67% 1.6m~2m 12.37% below 0.5m 6.39% 1m~1.6m 24.16% 0.5m~1m 15.38% % Transaction Structure Second-hand Housing by % % Area, May above % 0.60% % below % Transaction Structure of Second-hand Housing by Total Price, June m~5m 7.86% 2m~3.3m 30.22% above 5m 7.97% 1.6m~2m 12.16% below 0.5m 4.98% 0.5m~1m 13.30% 1m~1.6m 23.52% Transaction Structure Second-hand Housing by Area, June % % % % % above % below % m = million URBAN VIEW -15-

16 By total price, the transaction proportions of second-hand properties priced below RMB 1.6 million decreased across the board. The proportion of properties priced RMB million saw the largest decline, namely 2.08 percentage points. By area, in June, the proportion of second-hand properties below 70 sqm fell by 1.66 percentage points, the most significant decrease among all the area segments. URBAN VIEW -16-

17 Urban Analysis Retail / Office Market 1. Supply 1) Monthly Retail / Office Supply x Trend of Retail / Office Supply sqm 0 15/06 15/07 15/08 15/09 15/10 15/11 15/12 16/01 16/02 16/03 16/04 16/05 16/06 Retail property Office property The new supply volume of retail properties rebounded to a new high, totaling 330,000 sqm. However, the new supply of office properties saw a further decline to 209,000 sqm, down 27% MoM. 2) Retail / Office Supply by District Retail / Office Supply by District, June x sqm Fengxian Hongkou Huangpu Jinshan Jiading Retail property Pudong Minhang Office property Songjiang Yangpu Zhabei By district, Minhang, Songjiang and Hongkou were the top 3 in terms of retail supply. Minhang took the first place with 89,000 sqm supplied. In office sector, only seven districts had supply. Huangpu ranked the No. 1 with 50,000 sqm supplied, followed by Jiading and Pudong. URBAN VIEW -17-

18 2. Transaction Volume 1) Monthly Retail / Office Transaction Volume 60 Trend of Retail / Office Transaction Volume x sqm 15/06 15/07 15/08 15/09 15/10 15/11 15/12 16/01 16/02 16/03 16/04 16/05 16/06 Retail property Office property Under the combined effect of office projects and business-residential projects, the monthly transaction volume of office properties reached 556,000 sqm in June, hitting a record high. However, the transaction volume of retail properties was 179,000 sqm, basically flat with the volume in last month. 2) Retail / Office Transaction Volume by District 12.0 Retail / Office Transaction Volume by District, June 2016 x sqm Baoshan Chongming Fengxian Hongkou Huangpu Jing'an Jinshan Jiading Retail property Putuo Pudong Minhang Office property Qingpu Songjiang Xuhui Yangpu Zhabei By district, it was obvious that the soaring transaction volume of office properties was boosted by Pudong, Minhang and Jiading Districts, with 112,000 sqm, 99,000 sqm and 75,000 sqm traded, respectively. In retail sector, Pudong dominated the market with 54,000 sqm transacted. Other districts all saw poor transaction. URBAN VIEW -18-

19 3. Transaction Price RMB/sqm Trend of Average Transaction Price 15/06 15/07 15/08 15/09 15/10 15/11 15/12 16/01 16/02 16/03 16/04 16/05 16/06 Retail property Office property In June, the average price of retail properties fell by 10.2% MoM to RMB 22,074/sqm. The average price of office properties soared by 25.4% MoM to RMB 32,099/sqm. Half of the top 10 transacted office projects were high-end projects priced over RMB 40,000/sqm, which directly drove up the average price across the city. 4. Inventory Change Monthly Change of Retail / Office Inventory 1100 x sqm Retail property Office property In June, as the transaction volume of office properties created a new high, the supply-demand ratio was only The office inventories fell to 9,096,300 sqm, a new low over past 10 months. In retail sector, although the supply reached the high level, the transaction did not increased accordingly. The supply-demand ratio of retail properties rose to The inventories grew to 10,285,300 sqm at the end of the month. URBAN VIEW -19-

20 Cost of Construction Materials Prices of steel, cement, yellow sand and commodity concrete in June 2016 No. Material name May 2016 June 2016 Increase or decrease 1 Wire price (Φ8mm) (RMB/ton) 2, , % 2 HRB400 rebar (18mm) (RMB/ton) 2, , % 3 HRB400 Rebar (25mm) (RMB/ton) 2, , % 4 Ordinary Portland cement (strength grade 42.5) (RMB/ton) % 5 Yellow Sand (medium-coarse) (RMB/ton) % 6 Pump Concrete C30 (particle size 5-25) (RMB/m³) % URBAN VIEW -20-

21 Construction Cost Analysis Indicators I Project Summary Project name XXX Villa GFA 715 m 2 Project location Within the Inner Ring Road Pudong Height 7.4m New Area Structure type Frame structure Total floors 2 floors aboveground and 1 floor underground Function Detached villa 2000 Quota valuation Method of Prices selected charging from II Construction Cost Indicators No. Item Total cost (RMB) Index per sqm (RMB/m 2 ) Percentage Cost for engineering & installation 3,744,600 5, % I Engineering works 1,165,100 1, % 1 Soil (Stone) works 282, % 2 Masonry 105, % 3 Concrete and rebar concrete 402, % 4 Roofing & waterproofing 285, % 5 Anti-corrosion, insulation, thermal insulation 89, % II Decoration works 1,126,600 1, % 1 Ground & floor 57, % 2 Cylinder & wall 607, % 3 Ceiling 45, % 4 Paints, coatings, wall paper 78, % 5 Others 338, % III Installation works 260, % 1 Electrical Engineering 166, % 2 Water supply & drainage 94, % IV Measure fees 1,093,800 1, % V 32, % VI Government gees 26, % VII Taxes 39, % Shanghai Urban Construction Cost Consulting Co. Ltd. URBAN VIEW -21-

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23 Wanda Theme Park vs. Disney Park In a recent TV program, Wang Jianlin, chairman of Wanda Group, blasted Disney for its attempts to grab a foothold in China, saying that the company shouldn't have entered. Pointing to Wanda opening 15 to 20 theme parks across China to Disney's yet to be opened one, Wang likened Disney to a tiger that was no match for "a pack of wolves." Wang said Wanda would make it impossible for Disney China venture to make profit in the next 10 to 20 years. In response to Wang s open challenge, Robert Iger, CEO of The Walter Disney Company, stated that Wang s speaking would not bring any influence on Disney. When Wanda takes on Disney, who will be the winner in China? URBAN VIEW -23-

24 Urban View: Shao Minghao Project Director Shanghai Urban Real Estate Appraisal Co., Ltd. Grass always looks greener on the other side of the fence. Sometimes this is correct. For instance, the automobile industry, especially the components and parts sector, from tire, glass, wiper to sunroof, engine, gearbox, is almost dominated by foreign companies. Grass always looks greener on the other side of the fence. Sometime it is not the case. For example, in the competition between Taobao and ebay in 10 years ago and the competition between Baidu and Google in 6 years ago, the two world-famous Internet companies both lost out to Chinese companies. Therefore, whether the grass can be greener on the other side of the fence depends on many factors, such as industrial standard, company s development strategy. What result of the competition will be between Disney the grass on the other side of the fence and Wanda the grass within the fence? I think it may be a win-win result. One important reason why domestic automobile manufacturing industry goes down to the foreign ones is that the industrial standard of automobile manufacture is made by western developed countries. However, there is no such kind of mandatory standards in tourism industry. The target group of Taobao and ebay in China is almost the same, and so is that of Baidu and Google. It is a life-and-death struggle for them. However, the situation in tourism industry is different. Children may love both Zootopia (foreign cartoon) and Pleasant Goat (Chinese cartoon) because people s consumption of cultural products can be multi-level. From the perspective of development mode, Disney follows the URBAN VIEW -24-

25 strategy of boutique resort while Wanda targets grass roots. There are only 6 Disney Parks in the world over the 60-year development of Disney. By contrast, Wanda has planned to build more than 10 Wanda Cities nationwide in less than 10 years. However, based on China s population of 1.3 billion, the 30,000 visitors per day have already made Shanghai Disney Park an Expo Park. It is hard to justify whether Shanghai Disney Park can still keep its high quality in the long term. Therefore, as long as the destination is attractive enough, even domestic theme parks can also distract visitors from Disney. From this point of view, the win-win co-existence of Disney and Wanda does have its strong basis. URBAN VIEW -25-

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27 Tapping the potential of inventories the evolution of Shanghai s urban renewal The origin of urban renewal Urban renewal originates from the suburbanization of European and American large cities after World War II. Because of different land ownership systems, demolition and relocation were of great difficulty for the downtown area of European and American cities. Since the newly-built high-quality residential quarters concentrated in the suburbs, as time passed, more and more upper high-income groups moved to the suburban area. By contrast, the downtown of large cities was on the wane, with less tax revenue, aging infrastructures, poor social security and bad living environment. Under such context, western countries started urban renewal campaign to renovate and restructure the urban space of old downtown, upgrade urban functions and regain its vitality. From this point of view, the urban renewal in China s large cities has never stopped since 1990s. From negative side, the previous urban renewal campaign was greatly URBAN VIEW -27-

28 harmful to historical context and destroyed the existing structure of social micro operation. From positive side, it was the continuous urban renewal that helped the core area of large cities maintain the bright image and update industrial functions. Main appeals of Shanghai s urban renewal Obviously, the main objective of Shanghai s urban renewal campaign is not to save the main urban area from decline but to re-discover the land-use space in urban area to satisfy the enormous land-use demand caused by the upgrading of industry and the migration of population. Shanghai is the first city that sets forth the target of negative growth of construction land and tries to achieve this target. In 2014, the sixth land planning meeting set 3226 square kilometers as the ultimate size of construction land in 2020 plan. However, by the end of 2013, the area of Shanghai s construction land has already reached 3070 kilometers, accounting for 45% of the city s land area. There is only 156 square kilometers available for increase. In future, it is difficult for Shanghai to enlarge the space for land use simply through converting agricultural land to construction land. Shanghai must find a solution from the perspective of optimizing the structure. URBAN VIEW -28-

29 The 1986 Shanghai Master Plan. We can find that the land layout was still simple at that time, as the industrial land was a large tract. The Code for Classification of Urban Land Use And Planning Standards Of Development Plan (GBJ ) promulgated by the Ministry of Construction in 1990s presents the urban planning guidelines in industrial times. URBAN VIEW -29-

30 In 2012, the Ministry of Housing and Urban-Rural Development revised the classification and standards as follows: This time, it used percentage instead of absolute acreage of land. As the urban construction land per capita recommended by the Ministry of Housing and Urban-Rural Development was 100 sqm/person, the percentage could also be regarded as square number. The main changes lay in the increase of the proportions of residential, transportation and greenbelt land as well as the increase of the quota of public facility land. However, the quota of industrial land still remained high. In other international cities like Shanghai, industrial land only accounts for a small percentage in the land-use structure. There is great necessity for Shanghai to adjust the structure of Shanghai s inventory land. URBAN VIEW -30-

31 The emphasis of Shanghai s urban renewal In ten years ago, the value added by the secondary industry of Shanghai accounted for over half of the total. After a round of deindustrialization, now it contributes only nearly 1/3 and will be less and less in the future. In traditional thinking, such change will bring enormous demand for office buildings the main spatial carrier of the tertiary industry. However, the supply of Shanghai s office buildings remained abundant in the recent 10 years. This must be attributed to the forward-looking and targeted urban renewal campaign. In the 2009 layout of land available for redevelopment in Yangpu, we can see that the tier 1 river scene area was totally occupied by industry and warehouses, most of which were large state-owned enterprises. The shantytowns where industrial workers lived were situated at the tier 2 area, adjacent to the factories at the tier 1 area. URBAN VIEW -31-

32 The south Bund plot before Along the Huangpu River, tier 1 area was industrial and warehouse land. Tier 2 area was shantytown and old area. The difference lay in that the parcel here was divided into smaller parts with more complicated functions. In the subsequent years, under policy encouragement, much of the industrial land within the Outer Ring Road was converted to science park, cultural and creative industry park, and themed commercial shopping district. Oriental Fisherman s Wharf, renovated from the former wholesale market of bureau URBAN VIEW -32-

33 of aquatic products. Now it is an office and retail complex. Shanghai Fashion Center, renovated from the former Shanghai No. 17 Textile Factory Surpass Space Creativity, located at the east zone of Caohejing, renovated from the former Shanghai Jinxing Television Factory Over the past ten years, the urban renewal in Shanghai s central area was converting large amount of inventory industrial land into office or retail land. It composed the most significant changing factor of the land-use structure in Shanghai s central area and thus brought a series of far-reaching results. URBAN VIEW -33-

34 For example, the foregoing paragraphs have mentioned that the proportion of industrial land is much higher than that of public facility land. As a result, the large-scale conversion from industrial land to office/retail land caused the relative oversupply of office/retail projects and flagging prices. Shanghai Office Building Index by China Real Estate Index System (CREIS). There is an obvious inflection point near , in accordance with the startup of industrial land conversion. Making data regression through real estate database which is commonly used, we derive the result that the average annual growth of retail and office property price in Shanghai was 2-6% over the past 10 years. This level was even lower than the rate of return of bank financial products and far behind the price growth of commodity housing during the same period. URBAN VIEW -34-

35 Property price index by type based on July 2005 (1.0). There was a significant differentiation between the price indexes of residential, office and retail stores the residential price index skyrocketed while the retail/office price index remained flagging. All of the recent land kings in Shanghai are residential land. It is very common to see an office project and a residential project launched nearly at the same time and located at the same street may have a price difference of 30-40%. The focus of Shanghai s urban renewal over the past ten years was converting the usage of industrial land. It not only remedied the historical problem of surplus industrial land but also digested the huge demand for new office buildings caused by industrial restructuring, which played a critical role in controlling the overall business cost. However, at the same time, it also triggered new type of imbalance of structure. URBAN VIEW -35-

36 The absence of residential land in Shanghai s urban renewal In the process of urban renewal, why the large amount of industrial land cannot be converted into residential land? The low percentage of new residential land has both objective and subjective reasons. From the objective prospective, the residential land requires much more complicated supporting facilities than retail/office land, which directly restricted the discretionary expansion of residential land. From the subjective perspective, the control of residential land supply is an important part of population control in domestic megacity while the retail/office land supply is a way of implementing industrial policy guidance. According to Shanghai s Standard for Public Facilities of Urban Residential Area and District, when the government sells square meters of residential land, it shall be accompanied by square meters of supporting land, much of which is non-profit (allocated) land for educational and medical purposes. The hardware requirements, such as building, are not so hard to meet, but the software requirements are quite difficult to satisfy. For instance, a standard primary school of 24 classes usually needs teaching and administrative staff. A community hospital needs at least medical staff. In the old urban area at city center, educational and medical resources have already under tightly balanced situation, and the addition of public facilities needs the cooperation of multiple authorities, so you can imagine how great the difficulty is. In addition to the requirement for positive supporting facilities, residential district is also more sensitive to the negative environment influence than retail/ office land. For example, it has much lower tolerance for noise, air pollution than retail/office land. How to solve this predicament? One way is targeted supply with reduced supporting facilities, that is, to provide some residential supply for targeted group with reduced public facility requirements. URBAN VIEW -36-

37 Recently, the State Council promulgated Several Opinions on Accelerating the Cultivation and Development of Rental Housing Market. It says: Allow reconstructed housing for lease. Allow reconstructing retail properties into rental housing in accordance with regulation, with unchanged land use term and plot ratio, land usage adjusted to residential and same charge of water, power and gas with residential standard. Allow reconstructing existing housing for lease in accordance with state and local residential design code. The reconstruction cannot change the original fire compartment, safe evacuation and fire separation facilities and must ensure the fire-protection facilities in good and effective condition. Such kind of rental housing is mainly for young people migrating from rural area or small and middle cities to the first tier cities, most of whom are undergraduates and technicians. The common features of them include youth, low disease rate and small demand for medical service; most of them are single or newly married, without child and corresponding educational demand; they are busy in work, and their spare time activities are simple: Internet is enough, no need for community activity center or an open area. All in all, this group of residents has low requirement for public service facilities. Considering all above factors, converting retail land to residential land and then renting to these young people is a good choice. However, such kind of demand only accounts for a small percentage of the overall housing demand. This is why there is only a small proportion of residential land in urban renewal. URBAN VIEW -37-

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39 Policy: Adjustment plan for the outline of the national overall planning on land use issued for enforcement On 22 nd June, approved by the State Council, the Adjustment Plan for the Outline of the National Overall Planning on Land Use ( ) was issued for enforcement. The minimum area of cultivated land, basic farmland protection area and total size of construction land would be adjusted and the land-use structure and layout would be optimized. Urban View: The Adjustment Plan reduced the minimum area of cultivated land and basic farmland protection area while increased the total size of construction land in the first tier cities such as Beijing and Shanghai. To correctly understand the reduction and increase, we shall first know the meaning of these standards being adjusted. The land-use standards in the Adjustment Plan are planned amount for control instead of actual amount to achieve. That means the area of cultivated land in Shanghai and Beijing shall be larger than the adjusted standard, and the total size of construction land shall be smaller than the adjusted standard by Taking Shanghai as example, the standard of total size of construction land by 2020 was set to be 298,100 hectares in 2008 before the adjustment, and now it was adjusted to 32 hectares. Actually, by 2013, the existing area of Shanghai s construction land had reached 30.7 hectares, already exceeding the standard set in The investigation in 2009 showed that Shanghai s cultivated land area was only hectares, much lower than the standard of hectares set before this adjustment. Without the adjustment of standards, the standards certainly cannot be reached by Instead of really increasing the area of construction land, the adjustment is just to avoid the failure of meeting the control standard. The control of both construction land and cultivated land is quite challenging for the first tier cities. URBAN VIEW -39-

40 Policy: The State Council issues action plan for soil pollution prevention and control On 31 st May, the State Council released the full text of Action Plan for Soil Pollution Prevention and Control ( ten regulations for soil pollution ) to the public, which set forth totally 231 detailed measures. For the major soil problems harmful to the public s health, ten regulations for soil pollution proposed to focus on the cultivated land in agricultural land and contaminated plots in construction land and firmly defend the bottom line of agricultural product quality and soil environment quality. Urban View: Different from atmospheric contamination and water pollution, soil pollution is immovable and indissolvable, so the government adopts risk management and control and classified use rather than one size fits all remediation for contaminated land. There are various forms of land use, which means not all the contaminated land requires manual and high-cost remediation. For land contamination, the top priority is to establish a sound monitoring and valuation system before implementation based on local conditions. Therefore, the ten regulations for soil pollution set a specific target full coverage of soil environment quality monitoring sites in all counties (cities, districts) by Currently, many large real estate appraisal companies have been involved in the field of contaminated land valuation and remediation. The issuance of the ten regulations for soil pollution would serve as guidance for the business development in appraisal industry. The appraisal companies should also change their way of thinking in contaminated land valuation to satisfy the new policy. URBAN VIEW -40-

41 Finance: Shanghai promotes thorough supervision of pre-owned housing transaction money The head of Shanghai Commission of Housing and Urban-rural Development disclosed that the pilot real estate transaction money supervision platform in Songjiang would be rolled out across the city in this year to ensure the fund safety, avoid transaction risk, standardize real estate brokerage and facilitate real estate transaction. The down payment, bank mortgage, final payment and even brokerage commission can all be under supervision. Urban View: Government s thorough supervision of capital during the transaction process of pre-owned housing can guarantee the transaction. For example, it can protect the buyer s interests, preventing the brokerage from absconding with down payment; it can also prevent the brokerage commission from being randomly underpaid. With the promotion of capital supervision, the authority can master more real estate information through big data analysis, which will help the macro policy regulation on real estate be more refined. However, under capital supervision, the seller can only receive the down payment after the buyer gets the ownership of the housing; while without the capital supervision, the seller can receive the down payment when the buyer applies for mortgage to the bank or upon the signing of transaction contract, which will usually save at least 2 months. Therefore, as the capital supervision is not compulsory, many of the sellers may refuse to process the transaction under capital supervision. To solve this problem, we may learn from the letter of credit in international trade by asking the seller s bank or developer to provide capital bond. URBAN VIEW -41-

42 Market: China s asset appraisal industry has the first fundamental law On 27 th June, the 21 st session of the standing committee of the 12 th National People s Congress listened to the report on the reviewing result of the draft of Asset Appraisal Law. The Asset Appraisal Law totally has 8 chapters, 55 articles, including General Principles, Appraisal Professional, Appraisal Company, Appraisal Procedure, Industry Association, Supervision and Administration, Legal Liability, and Supplementary Provisions. The law will come into force on 1 st December Urban View: It has already been 10 years since the foundation of the drafting team. As a famous law expert says, law is the outcome of interest compromise; different interest bodies express their own appeals and finally come to a consensus. What kind of consensus does the asset appraisal law come to? 1. Appraisal Procedure: the Asset Appraisal Law defines the appraisal procedures as follows: select the appraisal company, sign contract, designate appraisal professional, site investigation, select appraisal method, make appraisal report, signature and seal, save appraisal archives, use appraisal report, and demurral disposal. 2. Industry Association Administration: the Asset Appraisal Law makes detailed stipulations of the establishment, charter, obligations and functions of industry association, standardizing the operation of appraisal industry association. 3. Establishment of Appraisal Company: to reduce cut-throat competition, the Asset Appraisal Law enhances the requirements of establishing appraisal company. 4. Legal Liability: the Asset Appraisal Law stipulates the legal liability of appraisal professionals, appraisal companies, clients, administrative departments, industry associations from administrative, criminal and civil perspectives. URBAN VIEW -42-

43 Market: Interim measures for the administration of collecting and using the land value-added revenue adjustment fund of rural collectively-owned commercial construction land released On 13 th June, the Ministry of Finance and the Ministry of Land and Resources jointly issued Interim Measures for the Administration of Collecting and Using the Land Value-added Revenue Adjustment Fund of Rural Collectively-owned Commercial Construction Land. Urban View: The Interim Measures include the definition, collecting scope, use management and legal responsibility of land value-added revenue adjustment fund. First of all, the Interim Measures define the collecting scope of land value-added revenue adjustment fund, that is, rural collectively-owned commercial construction land, which refers to the land proposed for industrial mining, business service and other commercial purposes in land-use master plan and urban-rural plan among inventory rural collectively-owned construction land. Secondly, for the marketization and transferring prices of rural collectively-owned commercial construction land, the Interim Measures provide two solutions: 1. Develop a benchmark price system of rural collectively-owned land, which is in accordance with urban state-owned land; 2. Those without developed system shall follow the local benchmark state-owned land price system. The Interim Measures also stipulate: if the marketization and transferring prices of rural collectively-owned commercial construction land are lower than the 80% of the benchmark land price, government of the pilot county enjoys priority in purchasing. Thirdly, the Interim Measures stipulate the ways of using the land value-added revenue adjustment fund: rural collective economic organization obtains the land value-added revenue in cash, reserves an enough part based on the principle of strengthening collective economy, and then makes fair distribution to the members of the rural collective economic organization. URBAN VIEW -43-

44 Statement of Urban View: 1. The copyright owner is Urban Surveyors. All content is only for readers' reference. The academic articles in this publication shall not be published on the Internet or other media or provided to other companies. If any part of the content is to be adopted or published, it shall get the official approval of our company and the source of information shall be indicated. 2. All the information and data published in the issue are derived from our integrated analysis and only for reference. We do not take any legal responsibility for its accuracy. Contact Person: Qin Yun 15-18F, New Golden Bridge Plaza, No. 1 West Beijing Road, Shanghai Postal code: Website: urbanview@surea.com Tel: URBAN VIEW -44-