Sell Shanghai property now for millions, or wait for billions?
Published: Mar 01, 2016 06:48 PM

Illustrations: Chen Xia/GT

News about Shanghai residents flooding district housing trade centers over the past weekend to take advantage of new tax incentives stirred up an already irrational real estate market where desperate first-time homebuyers are pitted against well-off owners in an over-crowded city where property is the most precious commodity.

As a local homeowner, I am among those who see real estate as a long-term investment as opposed to just flipping properties for short-term gains. Compared with the turbulence of our stock market, owning property is the most secure investment one could make here.

My family owns two apartments in the city, one where we live near our teen daughter's school and the other which we rent out. We intend to hold on to the rented-out property as a future dowry for our daughter. However, the skyrocketing real estate prices that have occurred in Shanghai in recent years really put us in an emotional quandary.

All around us, friends and neighbors who purchased new apartments a decade ago, as we did, for just a few hundred thousand yuan are now becoming multi-millionaires. Just this past weekend, after the new tax policy was announced, many apartments saw their value increase by 500,000 yuan ($76,500) literally overnight!

As previously reported in the Global Times [See: Monopolized property market sends Shanghai rentals soaring, 2016-1-17], commission-lusting real estate agencies are manipulating the market by convincing homeowners to sell or rent out their apartments at hyper-inflated prices. In 2014, city apartments saw their prices soar. In 2015, the average price for an apartment rose between 20 and 60 percent.

Local homeowners are constantly bombarded with phone calls from these aggressive agents, who blatantly beg us to sell our apartments and artificially raise their current market value on desperate prospective buyers. My friend who owns a 3-bedroom apartment in Minhang district worth 4.8 million yuan said that one agency instructed her to sell it for 5.1 million so that she and the agent could split the extra 300,000 yuan. Unable to resist the windfall, she agreed.

All this recent market manipulation reminds me of a quote I once read in Warren Buffet's book, "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."

Indeed, Shanghai's real estate market has become a kind of "Wild Wild East" frontier where rakes and rogues from all parts of China saunter into town, dress up in a black suit, call themselves a real estate agent and prey on the naivety of first-time buyers and the greed of landlords. Because China's real estate industry is unregulated and does not require a license, these agents do and say what they want.

Sure, my family could use the 5 million cash - a 900 percent profit - we'd earn overnight from selling our apartment with the help of an unscrupulous agent. Our daughter's university tuition is a looming threat on our bank account and somehow soon we will have to come up with the money. Unlike other local homeowners who are selling their properties for quick cash, I am not so shortsighted.

Compared with property prices in boomtown markets like Beijing and Shenzhen, Shanghai real estate is still quite reasonable and a wise investment for first-time buyers. The price of an apartment here will never go down beyond the occasional dip, and will continue to trend upward for time immemorial. In sum, to sell now would be stupid - becoming a multi-millionaire tomorrow sounds sweet, but becoming a billionaire next decade would be even better.

The opinions expressed in this article are the author's own and do not necessarily reflect the views of the Global Times.