Shanghai luxury property sales up significantly in second quarter of 2013

Sales volumes in Shanghai’s luxury residential property market rose significantly in the second quarter of 2013, but were not accompanied by an obvious increase in prices.

The number of completed transactions in the second quarter of 2013 was 39.6% higher quarter on quarter and 12.6% higher year on year, according to Knight Frank’s latest Luxury Residential Market Report for the city. However, despite these increases, prices were essentially flat compared to the first quarter of 2013.

‘In the second quarter, there was no new housing regulations imposed on the market, and we are still waiting for further details regarding other government policies. As a result, the impact of regulations on the residential market has been somewhat limited over the past three months,’ the report says.

However, the recently held State Council Executive Meeting made clear that new policy will support credit requirements for first home buyers.

In the luxury residential rental market there was a slight increase in rents in the second quarter, up by 0.4%. Supply has also increased with the opening of the Mandarin Oriental serviced apartments in Lujiazui bringing 210 new serviced apartments to the market.

With the upcoming registration period for international schools, expat employees began to search for residences to ensure their children’s admission into these schools. This bolstered demand in the second quarter, causing vacancy rates in the luxury residential market to drop down to 4.1%, a 0.5% point decrease quarter on quarter.

On the sales side, the new supply of luxury residential homes in the second quarter reached 280,000 square meters, an increase of 4.3% quarter on quarter. Urban supply was of particular note, reaching 80,000 square meters.

Transaction volume in the luxury residential market in the second quarter reached 148,000 square meters, a new high for the year, representing 39.6% and 12.9% increases quarter on quarter and year on year respectively.
The proportion of luxury homes sold within the range of RMB50,000 per square meter and RMB70,000 per square meter continued to increase, amounting to 70% of the total luxury residential sales in Shanghai.
While sales prices continued to increase in the quarter, the rate of growth was somewhat slower, with prices hovering at RMB57,165 per square meter, essentially flat in comparison to the previous quarter.

In the second half of 2013, some serviced apartments will be launched to the market. ICC Residences located on Huaihai Middle Roadand Park Royal Serviced Suites Green City located in Pudding will bring 64 and 325 serviced apartments to the market respectively.

Additionally, Times Square serviced apartments in Huaihai Middle Road will launch115 newly renovated apartments to the market. In the sales market, Zhongfu Garden Phase 2, Luxiangyuan Project Phase 1 and Grand Summit are expected to be launched in the second half. As a result, the tight supply in both luxury rental and sales markets will be eased.

‘Along with the expected increase in the number of MNC expat personnel arriving in Shanghai during the third quarter, the occupancy rates and luxury residential housing rents will increase. Furthermore, in the sales market, we expect that luxury residential units in core areas will continue to be sought after and that prices will continue to rise,’ the report adds.