Transaction volume in the high-end residential property market on the mainland will rise this year after authorities lifted curbs on pre-sale licences, but prices will increase at a slower pace as money flows out of the mainland, industry analysts say.
Beijing and Shanghai allowed the pre-sale of expensive home projects in January after imposing bans in October and November, respectively.
The licence suspension caused an accumulation of demand that would drive up transaction volume in 2014, said Gao Shan, vice-general manager of Yahao Real Estate Selling & Consulting Solution Agency.
Data from another agency, Landz Realtors, showed primary market transactions of high-end homes in Beijing slid 25 per cent last year from a year earlier to 3,567 units. However, deal numbers still exceeded full-year supply of 2,069 homes from 11 projects, including seven villa projects and four apartment developments, and cut the stock of unsold high-end homes to 5,375 at the end of 2013, down from 6,873 a year earlier.
"We expect rising supply in 2014 will not lead to a surge in stock, as new supply will mainly be villa projects and will be instantly taken up," Landz Realtors said in a report.
It said prices of high-end homes rose 6 per cent in 2013 to an average of 49,644 yuan (HK$63,550) per square metre in Beijing. Global property consultancy DTZ said prices rose almost 25 per cent last year to an average of 52,129 yuan per square metre.
Short supply of high-end homes and the increasing number of rich mainland families will continue to drive up luxury home prices this year but not as fast as before, as wealthy mainlanders are increasingly lured by cheaper foreign homes and easy migration procedures for countries such as Malaysia, Portugal, Hungary and Spain.
Lu Qilin of Shanghai Deovolente Realty said that land purchased at high prices by developers in recent months might turn sour.
The rising demand among rich families for larger and better homes, and the status of property as a popular investment, has pushed developers to bet on home price rises in top cities such as Beijing and Shanghai.
The two cities were home to one-third of the 1.05 million mainlanders with wealth of more than 10 million yuan at the end of 2012, as well as 30 per cent of those with wealth of more than 100 million yuan, according to a Hurun report.
Last month in Shanghai, almost all top mainland developers bid for a 96,429-square-metre residential-use land parcel. Hong Kong-listed Franshion Properties offered the most, 47,000 yuan per square metre, a bid 112 per cent more than the starting price.
"Land purchases at such an expensive price are risky," Lu said. "Traditionally, the neighbourhood is not a high-end market … Destocking the luxury market in Shanghai would now take two to three years, compared with nine months in the mass market."