S H A N G H A IThere was no significant property price adjustment in the market and rental levels in Shanghai remain resilient despite a series of housing policies released by central government to slow down house price growth. Relocations in Shanghai remained active in the traditionally slow fourth quarter resulting in both stable rental levels and occupancy rates.

P u d o n g L u J i a Z u iThe launch of the new luxury icon IFC Mall brought more attention to this popular area. The developer for IFC Mall, Sun Hung Kai Properties purchased one of the best sites on the waterfront of the Huangpu River with plans to build a 30-storey apartment to overtake Tomson Riviera Garden as the most luxurious residence in the Lu Jia Zui area. Units overlooking the Huang Pu River at Shimao Riviera Garden showed high activity in leasing transations with one successful lease conclusion out of an average of four viewings. As there are no new supplies to the market this quarter, Lu Jia Zui continues to enjoy outstanding occupancy rates with rental increments.

P u d o n g L i a n Ya n g & J i n Q i a oCongruent with the continued strong performance of the residential property market, Pudong Lian Yang and Jin Qiao enjoyed high occupancy in this quarter. Over the years, both areas have been developed into a popular community with facilities like international schools, medical clinics, shopping and entertainment options for overseas residents. This has attracted developers such as, Hutchison Whampoa Property who upgraded houses in Seasons Villa with new furnishings.

The project is expected to be completed and released on the market in summer 2011 to ease the housing shortage in the Jinqiao area. Other developers like Kerry Properties, developed a new luxury landmark - Kerry Parkside, which is an integrated hub with a retail mall, five star hotel, serviced residence and a grade A office.

Kerry Parkside’s serviced apartments will soon open with a total number of 182 units (size ranging from 75 to 470 sq.mtr) with one to four bedroom units and penthouses available.The rentals are estimated to start from RMB 30,000 to 85,000 per month, which will contribute to the supply of luxury apartments in Lianyang.

P u x i D o w n t o w nDue to the government’s recent housing policy to limit property speculation, transactions for property purchase and sale have declined in this area. For the leasing market, more long term leases were concluded this quarter, which made up for declining occupancy rates in the post EXPO period. Therefore rental levels for high end and middle level properties have remained fairly stable.

M a r k e t O u t l o o kApart from the “one more home per family” policy, which stipulates only one additional property can be purchased by each Shanghai family, another rule was announced to reduce the maximum loan available from the Provident Fund from RMB 900,000 to RMB 600,000. Both measures were implemented to restrict the purchase of additional property. central and local governments are monitoring the fluctuation of transaction prices closely and are expected to constantly roll out new policies in order to curb market rises if prices continue to climb. In 2010, although buy and sell transaction prices of high-end residential properties have continued to rise, rentals are expected to experience a small decline. There were approximately 600 new high end housing units ready to be released to the market in this quarter. This should give more choices and bargaining power to potential tenants in the next few months. In contrast, low range rentals (RMB 5,500 to 15,000) have enjoyed an unparalleled rise. For some properties such as Xu Hui Garden and other conveniently located compounds that are favoured by expatriates, the asking rentals are expected to increase as high as 20% .

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Information from Cartus on the residential leasing market in China for Quarter 4 2010

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B e I J I N GIn the fourth quarter of 2010, the leasing demand for luxury apartments and villas turned soft due to the seasonal downturn but the serviced apartment sector remains active, especially for larger sized units. Serviced apartment rental prices have reached their peak for 2010, enjoying around a 2% rise compared with the third quarter.

Although the fourth quarter was relatively slow for leasing transactions of luxury apartments and villas, rentals for luxury apartments rose 1.5% from the previous quarter.

S a n l i t u n A re aA newly launched property, SOHO Sanlitun has enjoyed overwhelming popularity in the market. It is conveniently located next to Sanlitun Entertainment Area with a number of dining and shopping options. This development opened up 200-300 fully furnished units with modern interiors and contemporary decor for leasing. Units were leased out quickly due to popularity with singles and young couples, which has resulted in a slight rise in rental prices due to competing offers. c h a o y a n g D i s t r i c t - G u o m a o A re a & c h a n g ’ a n Av e n u eDue to a slow fourth quarter, individual landlords of standard apartments with a rental range from RMB 18,000 to 35,000 tried to offer rental reductions to ensure a quicker take-up rate. Examples of standard level apartments in this area are Palm Spring International Apartment, Park Avenue, Central Park and Lee Garden. However, rental prices for luxury apartments such as Lanson Place and Embassy House either remain resilient or have seen a slight increase as a result of healthy market demand.

c h a o y a n g D i s t r i c t - L u f t h s a n s a c e n t e r & c h a o y a n g P a r kRentals for Lufthsansa Center remained stable as most of the residential choices are serviced apartments. Although Chao Yang Park Area is known for its greenery, easy access to downtown, and its general appeal to expatriates, the rental price

of standard level apartments dropped slightly by around 2% given the large supply; with some landlords offering up to a 5% rental reduction in order to secure new tenants quickly.

S h u n y i A re aThis area is close to many popular international schools and as a result is heavily affected by the school terms. Many expatriate families choose to leave Beijing during this season when the school term ends for the Christmas and new Year holidays. Occupancy rates for villas in the area have declined but are expected to rebound when school terms start and new families move into the area.

M a r k e t O u t l o o kThe central government continues to monitor the market reaction to restrictive policies on property purchases. Beijing residents who own two properties or non- local residents who own one property are disallowed from purchasing additional properties. This has resulted in a fall in purchase and sale transactions in Beijing properties, and will tighten the supply of properties available for leasing in the foreseeable future.

As many multinational corporations continue their expansion plans into Beijing and China, the residential leasing market will undoubtedly stay strong during the next six to twelve months. This is particularly applicable in the luxury property sector since senior executives are relocated here for strategic organizational expansion and development within China.

c H e N G D UAs in the past, the final quarter of 2010 was expected to be slow for leasing transactions with rental supply outweighing demand. However, with increased transferee volumes the rental prices reacted accordingly with rents on a few luxury residences being increased by more than 20%.

We s t c h e n g d uEgret Island Phase III has released more than 100 units of fully furnished one to two bedroom apartments into the market. The apartments are quite popular among singles and young couples. Approximately 40 units were available for rent, and about half were leased out in October and november.

S e r v i c e d A p a r t m e n t s ( c e n t r a l A re a )The Somerset Riverview is experiencing a moderately strong occupancy rate of over 60% as rentals remains stable. With the continued strong demand, Somerset has confirmed it will adjust the rental price upward by 17% in 2011.

Fraser Serviced Apartments officially opened at the beginning of 2011. However, they started a soft launch from December 2010 with attractive promotion prices.

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Prices foir studio and one bedroom apartments range from RMB 12,000 to 20,000. These affordable units were quickly reserved by incoming singles and the occupancy rate reached 10% before its formal opening. Oakwood Service Apartments is entering its final stage of construction and is scheduled to open in the second quarter of 2011 .

to n g Z i L i n A re a ( S o u t h c h e n g d u )Almost 90% of the properties in TongZiLin which meet expatriates’ standard are occupied. The popular choices around this area are Master, Europe City and Qing Hua Fang. The rental asking prices are higher than in the previous quarter by approximately 10%. Qing Hua Villa which has 131 houses, only has 23% of its stock available to lease and remains the most popular compound for expatriates with vacant units being taken up at a faster rate when compared to other TongZiLin developments. The Master, China Garden and J in Guan new City compounds enjoy more than a 90% occupancy rate.

Wa n g J i a n g A re a ( c e n t r a l S o u t h e a s t )The Times Residence Phase II with approximately 200 units was ready for handover to individual landlords in the last quarter of 2010. 20% of these apartments are currently being renovated with expected effective rental dates sometime in the first quarter of 2011.

The estimated asking price for three to four bedroom units at 179sq.mtr will range from RMB 20,000 to 30,000 whilst two bedroom units expect to command RMB 5,000 to 15,000. Phase III is expected to be ready for handover in the first half of 2011, and will provide more supply for leasing in this central area.

H u a Ya n g A re aLuxe Hills is still the largest and most popular compound in the far south peripheral of Chengdu city. Since lower gas pressure impacted the heating system of houses in Pine Valley, some tenants are looking to move to other sections within Luxe Hills. Sections of Oak Hills, Crystal Downs, and Pebble Beach remain popular for expatriate families, resulting in a lack of supply that subsequently has driven rental prices up by 20%.

M a r k e t O u t l o o kChengdu’s economy remained stable in 2010. In the fourth quarter, the city’s GDP grew 15% compared to 2009, and surpassed the national average. The city is anticipated to be one of the new host locations for many foreign enterprises looking to increase their presence in China’s South West region, therefore relocation into Chengdu is expected to continue growing in 2011.

This will in turn drive rental prices upward as demand for properties suitable for relocating employees continues to outstrip available stock.