Prices and rents in luxury property sector in Shanghai continue upwards

Luxury homes sales in Shanghai have decreased but prices are on an upward trend despite cooling measures designed to prevent the property market over heating.

In the fourth quarter of 2012 no further cooling measures were introduced in the Shanghai residential market but the Ministry of Housing and Urban Rural Construction restated that it would further enforce current restriction policies in 2013 with restrictions on home purchases and curbs on speculative housing demand continuing into the new year.

According to the latest analysis report on the city’s luxury property market from Knight Frank home supply doubled to 140,000 square meters in the fourth quarter of 2012 of which 70% were villas.

Sales decreased, whilst prices remained on an upward trend. The sales volume dropped 5.4% quarter on quarter to 114,000 square meters, whilst the average transaction price increased 10.3% to RMB55,712 per square meter.

The sales of luxury homes priced at over RMB100,000 per square meters increased to 14,975 square meters, up 13.8% quarter on quarter and The Lujiazui waterfront remained the most active area in terms of luxury home transactions.

The report points out that in the first quarter of 2013, Grand Summit in Jing’an District, developed by K. Wah Group, and The Eight in Changfeng of Putuo Area, developed by Youngor Property Development, are expected to be launched onto the sales market, providing a total gross floor area of 97,000 square meters and 35,000 square meters respectively.

The report also says that with the upcoming Spring Festival luxury transaction volume is expected to decline in the first quarter of 2013. ‘New luxury residential properties launched in the second half of 2012 will continue to gain popularity among buyers. We expect that housing demand for luxury homes in core areas will stay firm, whilst sales prices will continue increasing steadily in 2013,’ it explains.

In the sales market, new luxury residential supply reached 140,000 square meters in the fourth quarter of 2012, a quarter on quarter increase of 102%. The majority of the new supply involved villas.

In the rental market, the average rent reached RMB175.5 per square meter per month, a slight increase of 0.2% compared to the previous quarter. The occupancy rate increased 1.8% quarter on quarter to 95.7%.

The report says that due to stalled economic recovery in Europe and the United States, MNCs, with their expat staff, continued to look at China for growth and the slower rate of increase stemmed from declining rental budgets for mid to senior level employees coinciding with low season demand, making landlords more willing to accept tenants’ terms and lower asking prices.

It also says that for apartments with a monthly rent below RMB20,000 increased significantly from the third quarter of 2012.