Shanghai's luxury home sales boom as wealthy buyers flock to ‘safe haven' assets

The Star

3 days ago

Luxury home sales in Shanghai are defying a nationwide slump, as wealthy buyers snap up 'safe haven' assets amid expectations of further price gains – a trend likely to continue given scarce inventory and rising land costs.
In the first half of this year, the mainland's financial capital led in transactions of premium homes, accounting for sales of 482 new homes priced above 50 million yuan (US$7 million), more than 80 per cent of the total across 30 cities, according to data compiled by China Real Estate Information Corporation (CRIC).
For homes priced above 30 million yuan, transactions in the city reached 1,096 units, accounting for 60 per cent of the 30-city total. Two other tier-one cities, Beijing and Shenzhen, followed with 12 per cent and 11 per cent, respectively, the research institute added.
Nationwide, sales of new homes priced above 50 million yuan jumped nearly 50 per cent from a year earlier to 591 units, while sales of lived-in units in the same price category increased 43 per cent to 173 in the same period, according to CRIC.
The surge was underpinned by both demand and supply factors, analysts said. On the demand side, Shanghai's premium homes were emerging as a 'clear safe-haven asset, offering stability amid relatively high risks in other cities', said Lu Wenxi, an analyst at Centaline Property in Shanghai.
'Given the scarcity of residential properties in the city centre and the solid fundamentals of the homes themselves, investing in premium homes makes sense from both a risk and value-appreciation perspective,' he added. 'After all, there aren't many options for those with capital to deploy.'
On the supply side, a policy move last June to scrap the cap on land prices in Shanghai has also helped to sustain the value of properties.
Leading developers continue to focus their land acquisitions in prime locations within core cities 'as reflected in the rising land premium rates this year in tier-one and strong tier-two cities', said Shi Lulu, director of Asia-Pacific corporate ratings at Fitch Ratings.
New home sales in China were expected to decline by about 15 per cent this year, according to an earlier forecast by Fitch.
'Premium projects in top-tier cities are expected to provide ongoing support for the performance of upgrade-oriented sales,' she said, adding that growth in the high-end segment could help the property sector temper the slowdown.
Centaline's Lu said Shanghai's premium home prices would continue to rise.
'Land in the city centre is running out,' he said. 'With no land available, demolition becomes necessary, but the costs of demolition and relocation are rising each year, and housing price expectations are getting higher as costs increase.'
Shanghai was also one of China's only cities that managed to defy a broad-based decline in new home prices in June, as the country's property slump is set to enter its fifth year, despite official measures to support the sector that once accounted for a quarter of the country's gross domestic product.
Nationwide, new home sales fell to 9.7 trillion yuan in 2024 – less than half the level recorded in 2021, according to government data. - SOUTH CHINA MORNING POST