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Shanghai Property Prices Balloon with Opening of Disneyland

| Jun 17, 2016 09:19 AM EDT

China's Property Price Growth Hits Two-Year Low

Shanghai residents who despise the deluge of tourists with the opening of the Disneyland resort in the city and find the Disney train ugly could later possibly change their minds when they discover that having the tourist attraction also brings with it higher property prices.

In Chunsua, price tags of houses jumped by over 162 percent in 2015 from 2009 during the construction phase of the project. Now with the resort formally opened on Thursday and businesses enjoying a boom, residents have been advised to anticipate more appreciation of their properties.

The South China Morning Post reported that the owner of two apartments near the resort enjoyed over 1 million yuan boost on his personal fortune since he moved to Chunsua from eastern Yangpu District in compliance with urban redevelopment plans of the city government which offered him the two flats.

But profiting from the property price windfall does not always require selling one’s home at a big margin and moving elsewhere. As 10 million tourists visit the resort yearly, inevitably more rooms would be required, especially for those who want more affordable accommodation other than those offered by five-star hotels in the resort and the rest of the city.

Owners of homes at Chenqiao Village, located just three kilometers from the resort, plan to convert their homes into hostels and make available 1,000 rooms by the end of 2016 as alternative, but cheaper choices for tourists. The 1,000 rooms would complement the 1,220 rooms available at the two hotels inside the resort.

These accommodations would form part of a 24.7-square-meter tourism zone made up of commercial properties, hotels, subway links and other infrastructure.

However, not everyone is optimistic about the success of Shanghai Disneyland and its impact on the city’s economy. Wanda Dalian, which is building about 20 themed parks across China, believe it can dwarf Disneyland in the long run.

Market analysts Marci Ryvicke and Eric Katz, from Barron’s Asia, wrote on Friday in a note to clients that they do not see the park having a significant financial contribution to Shanghai for some time. The two project negative operating-income margin of about 10 percent on the resort’s first year of operation, break-even on its third year and only enjoy a 10 percent positive income on its fifth year by fiscal 2021.

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