Shanghai's luxury flat prices rose 5.3 per cent in the second quarter from the first quarter, thanks to a stock market fund outflow and continued purchases, a report by Jones Lang LaSalle showed.
The average price of flats of more than 180 square metres in the city's prime locations jumped to 31,425 yuan per square metre compared with a 0.6 per cent decline in the first quarter, Jones Lang said.
'It's a significant growth because in the past two years the market was pretty much flat,' said Kenny Ho, head of research for Jones Lang LaSalle Shanghai. 'Local investors cashed in on the stock market and turned to properties. There is also a push from overseas buyers who are bullish on the economy.'
The luxury property sector reeled from a government policy last year which restricted foreign ownership of mainland flats.
However, luxury houses gained ground in the second quarter as investors cashed out from the stock market on fears of increased volatility.
Overseas investors including those from Hong Kong and Taiwan also flocked to the mainland's most developed city to snap up flats, betting on further growth.
'With limited new units on the way, luxury prices on the secondary market will experience more upward pressure,' Jones Lang said.
'The Shanghai luxury residential market remains active with a high level of end-user demand for luxury residential properties,' it said. 'Investments in luxury residential properties shot up as many investors cashed out of the Shanghai stock market, and turned to luxury properties as long-term investments.'
In the first half, Shanghai also saw 13 whole-building purchase deals which were valued at 15.3 billion yuan on aggregate, representing 63 per cent of last year's total, Jones Lang said.
In late June, HSBC Holdings announced it would acquire 20 floors of Shanghai IFC in Lujiazui financial area from Hong Kong developer Sun Hung Kai Properties, the British bank's biggest property acquisition on the mainland.
Average rental for retail space in Shanghai has hit US$39.17 per day per square metre, a year-on-year increase of 11.2 per cent, Jones Lang said.
Reversal of fortune
Amount average rentals for luxury flats declined in the first quarter 0.6%