Shanghai developers receive pre-sale permits to begin luxury sales, but there’s a catch
Pre-approved government pricing means that Shanghai property developers may see their profit margins sharply constrained
A number of luxury Shanghai residential projects have secured permission from authorities to start sales, even as government curbs on the property market in place since last year could mean developers will have to accept lower prices.
At least seven high-end projects, involving developers Shui On Land, Poly Real Estate Group, China Sunac Holdings and Tahoe Group Company, have won pre-sale permits from Shanghai authorities, according to the website of Shanghai housing authority. The real estate companies can begin accepting orders ahead of a lottery from the middle of April that will determine which applicants are successful.
While the permits are good news for developers who have been waiting for as much as a year for permission to sell, price caps and other government measures imposed to cool the housing market mean that they will not get the prices they had hoped, analysts said.
“These permits are long overdue, and government can’t withhold them indefinitely,” said Lin Bo, research director of Shanghai-based marketing and research company CRIC. “But developers have to compromise on prices.”
“Developers will have to accept prices at least 30 per cent below what they had expected, in some cases even below the prices of nearby secondary homes, because if they do not sell, they’ll be burned by high financial costs and continued cash flow pressure,” said Zhang Zhijie, vice-head of China Index Academy, a property information and research company.
Shanghai has been among the more aggressive of Chinese cities in trying to cool property prices, amid concerns that unaffordable home prices could be a serious stumbling block to its plan to transform into a global financial hub and innovation centre.
