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Shangh's rental housing sector has become a focal point for global investors, garnering increased attention over the past year. This growth is largely driven by demographic shifts, supportive government policies, and significant hurdles faced by migrant workers attempting to gn permanent homeownership in the city.
As of December 2023, there are nearly 500 rental housing projects totaling approximately 187,000 units in Shangh. This represents a remarkable increase of over 57 compared to the total stock from 2022. Although the majority of these new developments are situated outside the city center, they have been well-received by the market due to their convenient access to public transportation, varied accommodation options, and comprehensive amenities including gyms, communal areas, mini-marketsall of which align closely with tenants' evolving needs.
Post-pandemic recovery has seen a significant rebound in leasing activity compared to 2022. Despite an uptick in supply, new rental units have been absorbed rapidly. The overall occupancy rate for projects operating for at least six months was consistently around the high of the range from 89 to 90. This strong demand came primarily from professional office workers, freelancers, and students seeking stable accommodations.
This year, there has been a notable shift in tenant preferences towards families with children and mid-to-senior-level professionals transitioning from traditional homeownership. The growing appeal of rental housing among this demographic suggests that long-term leasing demands are on the rise, particularly from individuals and families who might be attracted to the flexibility, mntenance-free lifestyle, and social benefits associated with renting.
As a result of these robust fundamentals, the net absorption in Shangh's rental market reached an impressive total of 51,000 units by the of 2023a significant increase from the previous year's figure. This growth underscores the sector's ability to withstand economic fluctuations and is expected to continue driving investor interest.
Looking ahead to future supply projections for 2024-2025, an additional 164,000 rental housing units are forecasted, primarily sourced from R4 land land zoned for rental use and R2 land residential-use land designated exclusively for rentals. Pudong District, Minhang District, and Qingpu District are expected to collectively account for over half of the city's rental housing stock by 2025. The majority 64.7 of these new units will be situated outside Shangh's Outer Ring Road. Approximately 19.6 of future supply will be located between the Middle and Inner Ring Roads, while 14.2 will be positioned between the Outer and Middle Ring Roads. Meanwhile, inner-city developments are limited, accounting for just 1.5 of total supply.
The robust fundamentals of Shangh's rental housing sector have made it an attractive investment destination for both domestic and foreign institutional investors seeking opportunities for higher returns through value-add or opportunistic strategies. In 2023 alone, the market witnessed a record-breaking 14 en-bloc transactions totaling RMB 7.2 billion in transaction volumean increase of 18 compared to the previous year.
The outlook for Shangh's rental housing investment market is promising for 2024 as more investors are expected to capitalize on its stable fundamentals and consistent performance across economic cycles, making it an ideal choice for both long-term and short-term investment strategies.
This article is reproduced from: https://www.jll.com.sg/en/trends-and-insights/research/shanghais-rental-housing-sector-in-the-spotlight
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Shanghai Rental Housing Market Growth Global Investors Focus on Rentals Demographic Shifts Drive Demand New Projects Near Public Transport High Occupancy in Rental Properties Family Attraction to Renting Options