August 29, 2006
Optimistic Initial Valuations
I noticed this full-page ad for the Tomson Riviera development in Shanghai while reading the July 15 issue of The Economist, but didn’t blog about it at the time. What caught my eye then was that this 44-storey tower has only 74 apartments which range in size from 406 to 1,240 square meters. I’d guess that the average Chinese family lives in an apartment around 60 square meters.
Anyway, I bring it up because my friend Maria sent me this Guardian article which reveals [emphasis mine]:
Few views of China’s spectacular economic growth could be more impressive than the one offered by the property company Tomson Riviera in Shanghai. From the top floor of its sleek, luxury apartment blocks in the Pudong development zone, you can, say the brochures, look out across the Huangpu river at one of the world’s most futuristic skylines.
The panorama does not come cheap. At 180m yuan (US$23 million) for a penthouse, this is the most exclusive residential complex on the mainland. Unfortunately for the developers, it is also the emptiest.
Since it opened in October last year, the waterfront development has failed to attract a single buyer for any of its 74 apartments. The situation is so desperate that Tomson has decided to put a second block out to global public tender.
Even so, analysts say, the price is unlikely to rise for several years. They blame it on an optimistic initial valuation of £8,200 a sq metre. Others blame a housing market swamped with swanky apartment blocks and luxury villas.
Yeah, I’d say asking around 125,000 RMB (US$15,500) per square meter is a tad on the high side, just a wee little bit optimistic. The ad is trying to appeal to “investors with vision,” but you’d have to be blind crazy to pay their asking price.
August 29th, 2006 at 8:50 pm
Ah yes, living the large life. Take BIG risks to make BIG rewards. Sooner or later something’s got to give in that RE market but I think it’ll be a blip on the radar as the rural Chinese swamp the cities, or at least try to.
August 29th, 2006 at 8:57 pm
Tom: Yeah, who knows, maybe in a decade or two $15,500/sqm will look like a bargain. As my wife likes to say when looking at Shanghai real estate, what would this place go for in Manhattan?
August 29th, 2006 at 10:52 pm
Are you suggesting the unit size is too large?
August 29th, 2006 at 11:15 pm
bjk: If you plan to house several generations or a soccer team, the smallest unit should suffice.
August 30th, 2006 at 12:29 am
1 meter=3.2808 feet. Ya, those are some biga$$ cribs.
August 30th, 2006 at 9:21 am
Zoomie: Yes, to put it in terms familiar to Americans, the smallest apartment is 4,370 square feet and the largest is 13,347 square feet.
The size of the average American house rose from about 1,500 square feet in 1970 to more than 2,300 square feet in 2001, with a particularly big growth spurt in the late 1990’s. I think Toll Brothers’ best selling McMansion is 4,800 square feet.
December 8th, 2006 at 12:12 pm
The thing special about this is that it’s one of 3 properties located on the river with a full river view in lujiazui.
The article mentions 2 properties that are river front. ( I assume they are referring to pengli and tomson) However, even Shanghai locals don’t know about a new project that has just been completed. It’s probably shanghai’s most luxurious project, and it has actually all been sold (compared to skyline mansion), except for maybe a few that have their river view blocked. The name is called Cai Fu Hai Jing Hua Yuan. It’s also located right on the river and the prices start at 50,000 rmb per sqm and shoots up and some larger units range up to $7Million USD. The sizes range from 300-1000sqm.
Half of Tomson’s price but tomson is fluff and overrated anyways. It just finished construction and has a public park along the river. The exact location is right next to the coal mounds which is also rumored (now a fact) to be bought by hk’s billionaire Li, who is planning to build a office/shopping complex. CaiFu is located right next to the international offices that look out of place because it’s the only group of non high rise offices on the river.
It’s kept secret because rumor has it, it’s full of high profile residents such as jiangzhemin’s son, jacky cheung hk’s famous singer in the 90s, and many others. Not advertised at all but when you pass by at night you will see the lobby and it should make you turn your head twice.
It also may show that people don’t like publicity as I’m sure there are more than enough people in this international city who can afford the sky high prices.
December 8th, 2006 at 1:46 pm
alf: Thanks for your insight. It sounds like precisely the kind of place that will be ransacked during the social unrest that is surely coming.