Luxury properties in sought after areas of Shanghai remain in demand despite the introduction of new taxes and other cooling measures, the latest report on the Chinese city’s residential market shows.
According to the report from Knight Frank the average transaction price will continue to grow, boosted by the launch of new projects, but there is some evidence of buyers slowing down as new home sales fell slightly.
The report also says that in the leasing market, influenced by the development of China (Shanghai) Pilot Free Trade Zone, more multinational corporations will be set up in Shanghai and the increase of new expat arrivals will bring about more leasing demand, which will certainly push up the average rent and occupancy rate.
Propertywire.com reported that in addition, due to the positive impact of China (Shanghai) Pilot Free Trade Zone and the lack of residential properties within the Zone, surrounding residential projects will face a new round of growth in sales price.
The report shows that the land market remained buoyant in the third quarter of 2013, with 32 residential plots transacted, 15 plots or 88 per cent more than the previous quarter. The active land market is correlated to the positive prospect of developers.
“Due to the enthusiasm of developers in acquiring land, over half of the transacted land achieved premium rates of over 100 per cent,” it said.
In the third quarter, luxury home supply surged to 320,000 square meter, up 14.3 per cent quarter on quarter, of which nearly 210,000 square meters was located in downtown, equivalent to the total new downtown supply in the first half of 2013.
But there are signs that some investors and wealthy buyers may be reaching their limit in terms of prices. There were some signs of purchasers’ enthusiasm cooling down as new home sales amounted to 138,000 square meter, down 6.7 per cent quarter on quarter.
Sales of residential properties priced over RMB100,000 per square meter decreased 27 per cent quarter on quarter. Such sales had fallen in July and August but in September, new home sales rebounded quickly to hit their highest level so far in 2013.
The luxury rental market is being influenced by the economic recession in Europe and the United States, the report says. Arrivals of managerial level expats to Shanghai decreased significantly in the third quarter. Leasing demand weakened whilst the occupancy rate fell to 94.1 per cent with a quarter on quarter decrease of 1.8 per cent.
In the third quarter, the occupancy rate of luxury villas in Pudong reached 95.4 per cent, down 1.3 per cent compared with the previous quarter.