Shanghai allows more luxury homes

PUBLISHED : Wednesday, 09 July, 2014, 3:36pm
UPDATED : Wednesday, 09 July, 2014, 3:36pm

Shanghai’s city government became the second in two months to allow more luxury properties into the market, real estate agents and developers said, in a sign that some Chinese cities are easing restrictive policies aimed at cooling an overheated market.

City officials in Beijing approved seven projects last month selling at prices above a cap set last November, which made developers less interested in bidding for expensive land in the capital city, media reported on Monday.

Any move to drive up home prices in China, which are already near record levels, can be controversial. The central government prefers that local authorities help curb property speculation, because it fears unaffordable housing could cause social unrest.

A project developed by Shenzhen Overseas Chinese Town in central Shanghai recently gained selling approval to set prices close to 300,000 yuan (HK$377,000) per square metre, a record for the financial centre, according to online marketplace SouFun.

“We have seen new projects setting prices above 100,000 yuan in the past few months,” said Thomas Lam, senior director at property agency Knight Frank.

“It’s a signal that the government is not implementing the administrative measures as strictly as it once did. It knows there’s still a demand for luxury housing.”

It’s a signal that the government is not implementing the administrative measures as strictly as it once did
Thomas Lam, Knight Frank

Developers also said it is much easier to get presale approval and sell to buyers who are switching homes.

“We are allowed to raise prices … there’s no formal documents about it, but we’re told verbally. We all know it’s been relaxed,” said a developer who declined to be named because of the sensitivity of the matter.

He said the company raised some prices to match increased market prices in the city.

Lam said a curb on luxury properties would discourage developers from buying land at prices at record levels, especially in the centre of top-tier cities. Land sales are the major revenue for most local governments in China.

Some local governments are also allowing people to buy more than one home, which had earlier been prohibited. Hohhot in Inner Mongolia was the first city to openly relax housing restrictions.

Some Chinese cities have also tried to limit property price cuts to 15-20 per cent from the original asking price, developers and real estate agents said in May, in an attempt to slow the industry downturn and boost confidence in the market.

More developments in China are offering discounts of more than 20 per cent, property research company Cric said in a report, and a development in Dalian in Liaoning province slashed prices by 39 per cent last week.