Rich Chinese snaps up multi-million-dollar luxury homes in Shanghai

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.