City living at a price
hanghai's luxury residential market had a banner year in 2009 when prices doubled to peak in late December at an average of 75,000 yuan (HK$87,400) per square metre, according to Colliers International. Since then, prices have come down and stabilised at an average of about 60,000 yuan.
Supply and transactions have contracted markedly since the first half of this year. Sales volumes began to recover in late summer and through the September 'golden period'. With the latest round of cooling measures implemented early in October, sales volumes have plummeted once again.
But Lina Wong, managing director for east and southwest China at Colliers International, says many developers have already reached their 2010 sales targets. 'So home prices will remain relatively stable,' she says.
Wong says the most notable change in the latest round of policies is to limit Shanghai residents to one home per family. It is also possible that a property tax will be introduced and monetary policy tightened. However, Wong expects to see underlying strong demand from residents wishing to upgrade their homes and affluent individuals moving into Shanghai.
Alan Chiang Sheung-lai, head of DTZ's mainland residential division, says rents for high-end flats in Shanghai increased in the third quarter, giving support to investment yield. 'Demand for luxury homes is strong and prices are likely to stay firm,' he says.
Chiang says market sentiment has been affected by new restrictions that foreigners will only be eligible to purchase one flat for their own use, even though main buyers of properties are usually Chinese nationals.
In Shanghai, the supply of luxury flats is restricted as a result of revised policies that require new projects with flats worth more than 30,000 yuan per square metre to seek presale consent from the city government.
Chiang expects homebuyers and investors to favour traditional luxury residential districts such as Jingan, Xuhui and Hongqiao. Many of the highest-priced projects offer views of the Huangpu River, or are located near key commercial areas such as Xintiandi and Lujiazui.
In the super-high-end sector, Tomson Riviera has been the benchmark project for Shanghai, with luxury homes selling at a price tag of more than 160,000 yuan per square metre. The project's location, next to Lujiazui, is second to none, offering magnificent views of Pudong and The Bund in Puxi.
One of the top-selling projects has been Shanghai Bay. Located in Xuhui district, the project's large apartments enjoy the scenery of the Huangpu River.
Chu Siu-wing, senior director of residential sales at Savills, says houses or villas in suburban areas, such as Xujing and She Shan, are also popular. 'For now, it is really a sentiment-driven market. But demand is still here and luxury homes continue to offer attractive investment opportunities. It is likely that sales will increase again in 2011.'
Shui On Land is launching the sale of The Manor, part of its Casa Lakeville project in Shanghai Taipingqiao. The Manor comprises 18 super-deluxe apartments, including duplexes and penthouses with gardens in five, four-storey towers. Their design is based on a 'villa in an apartment' concept.
Chu says The Manor is targeting to achieve an average selling price of 150,000 yuan to 160,000 yuan per square metre and the initial response is quite positive.
Other upcoming luxury project sales include two developments by K. Wah International Holdings and one by Sun Hung Kai Properties (SHKP).
K. Wah's Grand Summit, located at Urumqi Bei Road in Jingan district, will provide about 100,000 square metres of high-end apartments close to the commercial centre along Nanjing Xi Road. Another project, The Palace, will comprise about 140,000 square metres of mixed-use properties including luxury apartments, commercial facilities and serviced apartments at Jianguo Xi Road in Xuhui district.
SHKP's project is located on the waterfront of the Huangpu River in Pudong. It has about 170,000 square metres of luxury residences.
Larry Hu, director of residential services at Knight Frank Shanghai, says: 'The central government is trying to stabilise the market. But luxury home prices in Shanghai are still at affordable levels for wealthy homebuyers, and they are likely to remain steady.'