Racing against the clock
Searching for a new home in Shanghai is not for the faint-hearted — homebuyers are constantly under pressure to find their perfect home in the shortest time possible so that they can beat the next spike in property prices
Timing is of the essence when buying a home in Shanghai, and procrastinating for just a few weeks could mean the difference between a dream home and a mere roof over the head.
Last January, Yu Ting sold her two-bedroom apartment in Putuo district for 2.5 million yuan ($360,000) before setting aside 6 million yuan to buy a bigger home in the more central district of Jing’an. After a few weeks of searching, Yu decided to take a break and head back to her hometown of Wuhan in Hubei province for the Lunar New Year.
As it turned out, the trip was a very costly one. Property prices in Shanghai ballooned after the festive period and an apartment in Jing’an that had cost less than 6 million yuan before the holiday was now selling for between 7.5 to 8 million yuan.
As a result, Yu ended up buying a 200-square-meter villa for 6.6 million in Jiading district. While that might sound like a rather good price to pay for a home of that size, the location was not — she now spends three hours every day commuting from home to office and back.
To exacerbate matters, the education environment in their new neighborhood has proved to be unsatisfactory. For Yu, a self-confessed “tiger mom” who wants her child to attend only the most prestigious schools, this is the most agonizing aspect of all. In Shanghai, where most parents prioritize education over everything else, many have deliberately relocated just so their children can attend a good school.
Under China’s nine-year compulsory education system, which consists of six years of primary education and three years in a middle school, students can only be enrolled in the school that is nearest to his or her home. In the relatively remote Jiading district, well-known schools are scarce.
Zhou Qiong is one such parent. Formerly a resident in Minhang district, the 29-year-old said that she had started looking for a new home as soon as her daughter turned 1 as the previous location has very few quality schools. After viewing nearly 60 apartments in six months, Zhou sold her Minhang apartment in October for 6 million yuan before settling for a new home in Xuhui district that cost 8.3 million yuan just two days later.
The experience of looking for a new home, said Zhou, was such an exhausting affair that she “doesn’t even dare think about it again”.
“I believe that the home prices in Shanghai will continue to grow seeing how Shanghai's ambition is to become a city the likes of New York and London by 2040. When more and more people work and live in Shanghai, the price gap between prime residences and average homes will become larger in the years to come,” said Zhou.
Lu Wenxi, a senior research manager from Centaline Shanghai, said that nearly 14 million sq m of newly built residential properties were traded on the market throughout 2016, in contrast to the average annual transaction volume of around 10 million sq m in the previous years.
“In the past, most of the people buying property in Shanghai were first-time buyers who needed a home. Today, the majority of homebuyers are those who already own properties and are looking to upgrade or invest,” said Lu, who added that the average cost of new homes in the city had soared nearly 20 percent year-on-year in 2016.
Xie Chen, head of CBRE research China, noted that the last round of home price hikes was in the second half of 2014 and prices had continued growing until last year when the government implemented three rounds of tightening measures in March, October and November.
“The recent spikes in home prices have exceeded rational expectations and have gone beyond the tolerance level of the authorities. Hopefully the tightening measures will be effective in cooling the market,” said Liu Tianyang, general manager of Centaline Shanghai and the vice-president of the company’s Chinese mainland operations.
While some homebuyers may have heaved a sigh of relief following the implementation of the cooling measures, others like Wang Huiyao were left exasperated. On March 25, 2016, when the first batch of new measures — one of which stipulates that home buyers must have paid taxes in the city for at least five years — took effect, Wang instantly became ineligible to buy a home. She and her husband had only moved to the city in 2012.
But for those who already have the funds in hand and are just waiting for the right time to buy a home, experts said that property prices are expected to drop this year.
“Latest data collected from the secondary home market shows that transaction volume and asking prices have already been declining. We believe that this year may be a good time for first time homebuyers. It might take between 12 and 18 months before the home prices bottom out,” said Xie.
People queue at a property trading center in Baoshan district in March to have their home deals processed before the new cooling measures kick in.