Now Shanghai Surprises As The 'it' Location

Sun Herald

Sunday July 9, 2006

By MICHELLE SINGER PROPERTY WRITER

FORGET Sydney or Brisbane - China's largest city, Shanghai, is emerging as the newest "it" location in Australian property investment portfolios.

As Sydney's rental returns hover around 3 per cent and median house and unit prices struggle to hold their ground, investors are looking offshore for more viable options. And those who have already discovered the Chinese property market are being rewarded.

New apartments in the financial centre of the city can be bought for about $200,000 and offer yields of between 6 and 8 per cent.

Making the most of the trend is Sydney-based buyers agent David Cunningham, who set up Shanghai Vision four years ago with fellow ex JP Morgan colleague Graham Jeal. The company has sold 625 units in Shanghai in three years, with one in four investors from Australia.

Mr Cunningham said high growth, strong yields and an undervalued Chinese currency were spurring the interest.

Much of the property is being sold in Pudong, the newly established centre for the country's financial district in the heart of the city.

"The rents people receive from their Shanghai investments are covering their mortgage completely," Mr Cunningham said.

"People assume it's all KPMG, Macquarie Bank and Commonwealth Bank investors but it's usually people who have their own business or people who have been priced out of their own market. The apartments are in the central area of Shanghai near the CBD, close to transport and come fully furnished as a whole package."

The Chinese Government also restricts "off the plan sales" only allowing apartments to be sold when buildings are 70 per cent complete.

Anne McDonnell, a young financier from Coogee, bought a new one-bedroom apartment in Shanghai for $235,000 about nine months ago.

The unit, in Pudong, has tenants in place for five years and is returning a rental yield of 7 per cent - more than double Sydney's yield.

"I've got my house here and that's enough," Ms McDonnell said about whether or not she would invest in Sydney soon.

"My partner visited Shanghai and was blown away by the growth of the city and the diversity of the developments. I went over there not long after and was equally impressed."

Weekend Property starts Page 45

HIGH AND MIGHTY

* Shanghai is China's biggest city, with a population of 17.42 million (2004).

* Population increase 3,396,000 (25.5 per cent) since 1990.

* The world's busiest freight port.

* Its Oriental Pearl Tower is China's highest structure.

* Jin Mao Tower is China's tallest skyscraper.