BEIJING: Linda Wang, a 30-year-old Shanghai native, bought a 186-square metre new home in the city’s downtown Xuhui district at 26.4 million yuan (US$3.7 million) on August 29, after she and her family sold two other flats a year ago.
Wang, whose latest purchase is her third home in the city, represents a new trend among ultra-rich homebuyers who are snapping up luxury flats despite a national property downturn, in the hope that the scarcity of properties in prime neighbourhoods of first-tier cities can help protect their assets, reported South China Morning Post.
The Xuhui home was one of 120 units on offer that day at Auant, with an average price of 26.6 million yuan per flat, all of which were snapped up within 30 minutes of launching.
“At present, you really don’t have many options for investment,” said Wang. “A downtown house is the desired one, otherwise I don’t know where to allocate my assets without them depreciating. The housing market has corrected for several years and current prices are attractive enough, especially for new homes.”
A 40-year-old finance professional, who declined to be named for privacy reasons, also bought a unit for own use, banking on its future price appreciation. He pointed to the prime location of the flats, which are surrounded by hi-tech companies in Shanghai’s central business district.
Meanwhile, Bloomberg News reported that a US$15 million penthouse was snapped up hours after it went on sale. More than 200 homes priced from nearly $5 million were taken in less than a day. Apartments worth US$3.8 million were five times oversubscribed.
Shanghai’s luxury real estate market is a bright spot in China’s bleak property sector. It’s the only one among the country’s mega cities that’s still attracting people to put down money in an asset class that has otherwise been abandoned.
The move is driven by rich Chinese — many dwelling in the Yangtze River Delta region that Shanghai is part of — who are parking their money only in surefire investments.
The recent buyers still see luxury residences as an optimal choice, given Shanghai’s financial hub status, the scarcity of supply of such dwellings and the discount that new offerings boast compared with existing ones.
The trend underscores the diverging outlook for real estate in a country with big wealth gaps. Outside of Shanghai, China’s majority of cities — including even the capital of Beijing — are still struggling to revive transactions and prices, even after the government pushed out its strongest yet stimulus measures.
“An uncertain economic outlook drives the wealthy to park money somewhere conservative,” said Song Hongwei, research director at property agency Tospur Real Estate Consulting Co. “When they’re short of better channels to allocate assets, core real estate in Shanghai’s prime area becomes a handy choice.”
Another report from VNExpress, said, Shanghai’s high-end real estate market is attracting wealthy Chinese as they seek to invest and capitalize on the supportive measures introduced to bolster the country’s dreary property sector.
The Shanghai Arch building, developed by Hong Kong-based developer Sun Hung Kai, recently experienced a surge in demand, Bloomberg reported.
Its 212 luxury condos attracted over 1,000 prospective buyers and completely sold out on the first day, with a $15 million penthouse purchased within hours of launch.
Similarly, developer Sunac's One Sino Park project saw 4,000 potential buyers vying for 204 apartments, despite the cheapest one costing nearly $5 million - a record high in Shanghai this year.
Another project, backed by Hongkong Land Holdings, saw five times more buyers than available units, despite an average selling price of $3.8 million.
The demand for luxury homes is so robust that buyers are willing to invest in units that have not been built yet, despite growing concerns in China over developers failing to deliver on pre-sold properties.
In the first five months of this year, sales of new Shanghai housing units priced at above 30 million yuan (US$4.13 million) have surpassed the annual figures in the last seven years, data from Chinese property consultancy Tospur shows.
Meanwhile, the average price of premium residences in the city has increased by 18% from the previous year, far outpacing the 0.6% year-on-year rise seen in the overall new-home market in Shanghai.
The latest surge in the city’s luxury real estate market is fueled by affluent Chinese individuals, who is looking to invest their wealth in secure ventures.
Many of the recent buyers reside in the Yangtze River Delta region that Shanghai is part of while others are from different provinces, such as the neighboring Zhejiang and Jiangsu, according to sellers and developer advisers.
These people deem high-end residential properties in Shanghai, a major financial hub, to be lucrative due to the limited availability of such properties and the competitive pricing of new projects.
Furthermore, they are trying to take advantage of recent supportive measures, including policy easing, that the Chinese government introduced in late May to help out the struggling property sector.
In Shanghai, the down payment requirement has been reduced to 20% from 30% for first-time homebuyers and from 50% to 35% for those purchasing second homes, as reported by the South China Morning Post.
Additionally, the minimum five-year mortgage rates have been lowered from over 4% to 3.5% for primary residences and 3.9% for secondary homes.
The city has also relaxed its price caps on new homes, which were implemented to moderate the property bubble.
Furthermore, households with two or more children can now purchase a third property, easing a 2011 policy that restricted them from owning more than two.
Since the supportive measures were rolled out, properties in big cities like Shanghai and Beijing have seen more interest and transactions.
A real estate agent in Shanghai told Reuters that inquiries for apartments have tripled while their sales volume has risen to 700-900 per day from 500 previously.
Another agent said home viewings in the city have increased by 60%.
A realtor in Beijing said viewings in the capital also have increased significantly.
Last month, the top 100 property developers in China saw their sales surge by 36.3% from May, according to data from real estate researcher CRIC.
While this still marks a 16.7% decline from a year ago, it is an improvement from the 33.7% year-on-year drop seen in May.
This has resulted in huge gains for Chinese developer shares listed in Hong Kong on Tuesday, with some rising by more than 5% during the session.
However, property markets in smaller cities have barely budged. "Smaller cities are doing a lot to incentivize people to buy more homes and it's simply not working," Christopher Beddor, deputy China research director at Gavekal Dragonomics, told Reuters.
And even in Beijing, luxury projects are not seeing as many buyers as in Shanghai.
Nonetheless, Lu Wenxi, an analyst at property agency Centaline Group, anticipates that the surge in activity will taper off in the latter half of the year once pent-up demand subsides.
Song Hongwei, research director at Tospur, advises that only projects in prime locations are likely to sustain momentum.
