China Retail: Scouting for Comparative Bargains via Average Prices per Floor Area

Stephen Chung

Managing Director

Zeppelin Real Estate Analysis Limited

June 2007

(Based on Data from Soufun - China Real Estate Index System CREIS)

We have been studying in relative detail the macro real estate statistics provided by Soufun-CREIS and have performed some basic calculations. One such calculation involves a comparison of the average prices per floor area (Yuan / m2, 1 m2 square meter = 10.76 ft2 square feet, and US$1.00 = 7.65 Yuan as of the date of writing this article) among nine 1^st and 2^nd tier cities-markets. Using the Beijing average price per floor area as base [=1.00], the average prices of the remaining cities are compared to it. A figure higher than 1 means the city’s average is above Beijing’s, while a figure lower than 1 means it is below Beijing’s. The nine cities are Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin, Chongqing, Wuhan, Hangzhou, and Chengdu. Please note these average prices reflect mostly 1^st hand transactions: 

A few observations can be made as follows (purely from the table above): 

A)     Between Beijing and Shanghai = Shanghai appears to offer some potential bargain if not now then at least sometime in future, even assuming its ratio is to be lower than Beijing’s always. However, if one deems the two cities to be at least on par in terms of market scale, global appeal, urban quality, and so on, then Shanghai should definitely deserve a closer look.

B)     Between Guangzhou and Shenzhen = Guangzhou deserves some attention as its ratio to Beijing’s is relatively low in recent times. Reportedly, its supply is not significantly higher compared to other cities on a pro-rata basis and if anything, the supply trend appears to be downward thus implying no significant increases in future supply. 

C)     Among the 2^nd tier cities = Chongqing may deserve some interest as its price level appears to be low compared to the others. Nonetheless, supply is also greater.  

Stating the obvious, the above is based purely on the data presented above and technically this is not sufficient for formulating a firm investment decision. Other factors and analyses are required for more comprehensive consideration. Please also note that the ratios in the above table can only tell if a city’s average price is higher or lower than that of Beijing during a particular time period i.e. it does not automatically infer price rise or fall.  

Notes: The article and/or content contained herein are for general reference only and are not meant to substitute for proper professional advice and/or due diligence. The author(s) and Zeppelin, including its staff, associates, consultants, executives and the like do not accept any responsibility or liability for losses, damages, claims and the like arising out of the use or reference to the content contained herein.

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