Chinese yields still very low
March 15, 2018
|Last Updated: Mar. 15, 2018|
|BEIJING- Apartments||PRICE/SQ.M. (US$)||YIELD (p.a.)||PRICE/SQ.FT. (US$)|
|TO BUY||MONTHLY RENT||TO BUY||MONTHLY RENT|
|CBD and Jiangoumen||13,150||21.28||1.94%||1,222||1.98|
|SHANGHAI - Aapartments|
|SHENZHEN - Apartments|
|Chengdu - Apartments|
|GUANGZHOU - Apartments|
All yields are gross - i.e., before taxes, repair costs, ground rents, estate agents fees, and any other costs. Net yields (what you´ll really earn) are typically around 1.5% to 2% lower.
Source: Global Property Guide and Fang 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.