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Mar 23, 2016

Chinese yields still very low


Last Updated: Feb. 14, 2016
BEIJING- Apartments COST (US$) YIELD (p.a.) PRICE/SQ.M. (US$)
TO BUY MONTHLY RENT TO BUY MONTHLY RENT
150 sq. m. n.a. 3,065 n.a. n.a. 20.43
250 sq. m. n.a. 4,978 n.a. n.a. 19.91
450 sq. m. n.a. 9,788 n.a. n.a. 21.75
SHANGHAI Luxuriuos apartments
50 sq. m. n.a. 1,234 n.a. n.a. 24.67
85 sq. m. n.a. 1,907 n.a. n.a. 22.44
120 sq. m. n.a. 2,483 n.a. n.a. 20.69
200 sq. m. n.a. 4,258 n.a. n.a. 21.29
SHENZHEN - Apartments
60 sq. m. n.a. 793 n.a. n.a. 13.22
150 sq. m. n.a. 2,093 n.a. n.a. 13.95
GUANGZHOU - Apartments
75 sq. m. n.a. 1,067 n.a. n.a. 14.22
150 sq. m. n.a. 1,968 n.a. n.a. 13.12
Districts researched:
Beijing: Chaoyang, Dongcheng, Xicheng
Chengdu: Jinjiang, Jinniu, Qingyang, Wuhou
Guangzhou: Tianhe, Yue Xui
Shanghai: Changning, Jing´an, Pudong, Xuhui
Shenzhen: Futian, Luohu, Nanshan
Source: Global Property Guide Definitions: Data FAQ See also: Update Schedule

When we first began to gather data on China, gross rental yields in all categories of Beijing condominiums were above 9%, and gross rental yields for villas in Beijing ranged from 9.5% to 13%. In Shanghai, returns were less stellar, with gross rental yields on apartments ranging from 5.4% to 7%.

Last year, we found that rental yields on almost all sizes of apartments in Beijing were below 2.5%, and in Shanghai below 3.2%.  It is hard to escape the fact that prices have been climbing steeply, while rents have not moved much.

This year, we´ve found it difficult to collect data, hence the rather disappointing table above. But we have no reason to believe that yields have changed much.

Yields below 3% are a danger signal. We were reluctant to join the chorus warning about a bubble in China in previous years, for the good reason that in 2008, apartments in most large cities in China had rental yields above 5%, a level which we generally consider ‘safe’.

However the year before last we declared that, with that yields of less than 3%, the danger signals were flashing red. We were the first to warn that a crash was likely in the Baltics, and then, our signal was that yields dropped below 3%. We gave similar warnings in Dubai.

So that year we gave the same warning about China – and we believe we were right. It’s not been a exactly a crash, but for sure the period of market ebullience is over. The authorities are in a very difficult situation, and it is hard to know what they will do. But many Chinese property investors are voting with their wallets, and buying properties elsewhere. 






Comments

#1 MARC | May 16, 2010

Your numbers are conservative. The renter has a lot of bargaining power in Shanghai. I would say (from personal experience) that your yields are about 1% too high.

#2 HOWCOME | May 18, 2010

Agree with Marc. Live and rent in Beijing now. 160 SM, asking sales price 4.8 M Yuan, rent 6 K Yuan/month.

#3 THOMAS | June 15, 2010

the ordinary appartment yield in Beijing is lower,an appartment sells 1.6 million yuan will rent only 36 thousands per year(yield 2.25%).
and the high end(in your statistic)have a extreamly high Vacancy rate you can't imagine,about 80% of them are empty as my observation.

#4 STEVE HEMINGWAY | August 03, 2010

Rent is determined by tenants actual earned income, which is roughly constant in real terms. Property prices are largely a function of sentiment and availability of credit. The persistent momentum of prices in real estate markets deludes investors into thinking that "income doesn't matter". Of course it does, and since nobody can be cash flow positive on a yield of 2.5% even with the cheapest financing imaginable, then these figures have to predict that high end property in Shanghai and Beijing is on the point of a huge crash.

Of course it might be ten years before we actually see it, and a lot of rich people will take this as evidence that people like me don't know what we are talking about.

#5 BILL COUGHLIN | September 12, 2011

Wow i love these stats

How can i get monthly data to graph beijing and hong kong home price indexs

Chech out th the vancouver market reports

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