According to China Real Estate Information Corp, sales of newly launched luxury homes surged by 39 percent, reaching 1,544 units in the first half of the year.
Luxury homes in Shanghai are bucking the downward trend in China's broader real estate market, as affluent buyers, largely unaffected by the industry's prolonged slump, continue to upgrade to newly built properties in prime locations, according to analysts.
Most high-net-worth individuals believe that land scarcity and the long-term economic growth potential of the mainland's commercial and financial hub will sustain price appreciation for these high-end properties.
In the first half of the year, a total of 1,544 luxury homes were sold in Shanghai, marking a 39 percent increase from the same period last year, according to data from China Real Estate Information Corp (CRIC). Approximately 90 percent of these transactions occurred in the primary market, as noted by You Liangzhou, owner of the property agency Baonuo in Shanghai.
Luxury residential units are defined as homes priced at over 30 million yuan (US$4.2 million). In Shanghai, most ultra-expensive flats are situated in the city center, such as the Huangpu and Xuhui districts, while villas are found in suburban areas like Qingpu.
Flats in downtown areas are typically priced at around 200,000 yuan per square meter, equivalent to a white-collar worker's annual salary.
"New housing projects launched this year have attracted wealthy buyers," said Shirley Tang, senior director of residential sales at Savills Shanghai. "We've observed a strong desire among affluent buyers to upgrade from their older properties. They’ve moved past concerns about the stock market and have ample cash to invest in better housing."
Local authorities in Shanghai continue to tightly control the prices of new homes. The city’s housing bureau reviews developers’ pricing for new projects and imposes caps to stabilize the market. As a result, new homes are often sold at a discount compared to existing lived-in flats in the same neighborhood.
“Luxury homes in Shanghai are always worth buying, despite growing concerns about a housing bubble,” said Gu Wenjin, a Shanghai-based entrepreneur with a budget of about 50 million yuan for a new flat. “After all, these are rare assets sought after by nearly all wealthy individuals from Shanghai and other parts of the country.”
A 36,680-square-meter residential plot in Xuhui fetched a record price at auction on Wednesday, highlighting mainland developers’ increasing enthusiasm for building premium homes to attract high-net-worth families. Greentown China Holdings paid 4.8 billion yuan, or 131,000 yuan per square meter, according to official tender data, surpassing the previous record of 100,000 yuan set in August 2016 by Ronshine for a plot in Jingan district.
“Most prospective homebuyers, including those in Shanghai, are wary of further price drops. However, high-net-worth families remain eager to purchase premium units, particularly those with views of the Huangpu River or sweeping city vistas,” said Song Yulin, a senior manager with the property agency Lianjia, a unit of KE Holdings. “In the near term, the luxury segment will continue its upward momentum.”
Shanghai, often referred to as China’s economic engine, posted a 4.8 percent increase in economic output in the first half of the year. Earlier this year, the municipal government set a growth target of 5 percent for 2023. Shanghai’s gross domestic product grew by 5 percent to 4.72 trillion yuan in 2023, slightly below the official target of 5.5 percent.
