Demand for serviced apartments has picked up as companies continue to grow their operations in China, said Savills in a recent report on the forecast of the China real estate market. The report further added that international companies are still cost conscious when it comes to budgets only increasing them as much as is necessary to maintain accommodation levels.
Although the market has largely been dominated by first-tier cities, increasing interest – especially for short term rentals – is being witnessed in second-tier markets. Growing interest from wealthy Chinese business men and women has been noted as they become increasingly mobile and look to enjoy the comforts of home on the road.
The report said a slowing residential sales market has encouraged landlords to place their units onto the leasing market and thereby increased supply and competition in the strata residential market. However, the residential leasing market should remain fairly stable going forward, with Shanghai remaining a focus for many international companies. The pace of growth in demand should be large enough to absorb a significant amount of the new supply coming to the market.
For residential sales, the report stated that government measures to cool the market continue to dampen demand from end-users and investors, as potential buyers take a wait-and-see attitude toward the market.
The slower market means developer finances have been hit by falling transaction volumes and a tighter monetary policy framework putting pressure on many to start lowering their asking prices and scale back their expansion plans, potentially resulting in a supply shortage two to three years down the road.
New supply is increasingly coming to decentralised locations as developable land is core locations becomes limited, metro networks expand and prices in downtown locations become increasingly unaffordable, said the report.
The government’s regulations designed to cool the residential market are having a bigger impact on the mass market than the high-end market as buyers in the high-end market require less less leverage, concluded the report.
