Socam banks on year-round luxury
Hong Kong-listed developer Socam is hoping to reverse the decline in luxury residential prices in Shanghai when it offers its serviced apartments at Four Seasons Place in the 21st Century Tower in Pudong for sale next quarter.
'They are the only serviced apartments that are managed by the Four Seasons Hotel Group in Shanghai and they command a spectacular view of the Huangpu River in the centre of the city's new financial district. That makes it a rare product,' Socam Development chief executive Philip Wong said.
Wong was addressing a media group invited to Shanghai by Socam to view the flats, which he said would go on sale in the third quarter at prices of 'up to 140,000 yuan (HK$171,700) per square metre'. That would put price tags on the flats, which range in size from 149 square metres to 325 square metres, of between 21 million yuan and 45.5 million yuan each. To achieve those selling prices Socam will be banking on a better reception from buyers of luxury flats on the mainland than the present luxury project in Pudong, Sun Hung Kai Properties' (SHKP) Shanghai Arch.
SHKP said last month that it had sold one-third of the first batch of 100 units at Shanghai Arch for 100,000 yuan to 130,000 yuan per square metre. The flats were offered for 93,100 yuan per square metre and 150,000 yuan per square metre.
But SHKP said the 300 square metre penthouse at Shanghai Arch would be offered at a price of 264,000 yuan per square metre, which would be a record high price for the mainland if it were achieved. The penthouse has not yet been put on the market.
Property consultancy Knight Frank said average luxury home prices in Shanghai began falling in the final quarter of last year and by the end of the quarter were down 5 per cent on the previous quarter at 50, 284 yuan per square metre.
It forecast that with restrictions on home purchases likely to remain in place, average luxury home prices in Shanghai would fall a further 5 per cent in 2012.
Colliers Research and Advisory Services, meanwhile, said further downward corrections in residential prices on the mainland were expected in the second quarter of 2012 'as sales volumes remain low and developers still holding heavy inventories are forced to release properties to prop up balance sheets despite the unfavourable market conditions'.
David Chen, senior director of CB Richard Ellis, said the Four Seasons Place were serviced apartments, which would not be subject to the home purchase restrictions imposed by the central government.
'As the project is considered a commercial development instead of a residential project, it will not be covered by the government's curbs,' he said.
In January last year, Beijing unveiled a package of eight austerity measures to put the brakes on rising property prices.
For the first time, local governments had to set targets for average home prices. Following guidelines set by Beijing, 35 major cities moved to restrict their residents from buying more than two flats.
Chen, however, said buyers for such properties could only get a 50 per cent loan-to-value ratio for a 10-year term mortgage loan.
The leases for such commercial properties were only 50 years compared with up to 70 years for conventional flats, he said.
Wong said Socam spent a total of 50,000 yuan per square metre, inclusive of the purchase prices and renovation cost, and would generate as much as three billion yuan if all 73 apartments sold.
The number of square metres of new homes sold in Shanghai in the first quarter
- it was a 16 per cent year on year decline