Last year city officials announced an ambitious plan to build 700,000 affordable rental units. By the end of the year, 29 parcels of land, covering 2.4 million square meters, had been sold for residential development. The sales are expected to produce around 40,000 units.
But even as local officials make strides towards increasing the city’s level of affordability, recently published reports by the UN and the Chinese Academy of Sciences indicate that Shanghai’s high cost of living keeps it from being an attractive destination for highly skilled professionals.
For one thing, the city’s recent push to develop the rental market has been focused on low-income housing. Many analysts believe that the city also needs to develop its mid-range rental housing sector. They stress that it’s not just about producing a high number of units; the city needs to create good quality, affordable housing that will attract top financial and IT talent.
Although researchers point to high home costs in both Shanghai and Hong Kong as problematic, some industry executives believe that there are other problems keeping Shanghai from becoming a major global financial and tech hub.
Industry executives cite Hong Kong’s free flow of information, low taxation rates, and attractive capital outflow regulations as some of things that attract expatriates to Hong Kong over Shanghai.
According to Joe Zhou, JLL China’s Head Researcher, “Shanghai officials are aware of the need to establish a developed property leasing market to support its future growth. But that will takes some time.”
The return rate on rental housing is very low in Shanghai, and this has long been an issue in attracting interest towards developing the market. But new government regulations, combined with the recent flow of asset-backed securities and government-backed real estate funds should help to spur growth.
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