Shang­hai lux­ury homes shrink; prices stay high

China Daily (Hong Kong) - - BUSINESS - By LUO WEITENG in Hong Kong sophia@chi­nadai­

A big trend to­ward small things is well un­der way in Shang­hai’s lux­ury real es­tate mar­ket.

The me­trop­o­lis’ strato­spheric hous­ing prices are forc­ing de­vel­op­ers to down­size high-end prop­er­ties to make them af­ford­able.

“Shang­hai’s lux­ury real es­tate mar­ket to­day is repli­cat­ing the story of Hong Kong,” said the Shang­hai of­fice of Hong Kong-listed China Over­seas Land and In­vest­ment Ltd. “Buy­ers are ac­cept­ing the idea that lux­ury homes could go with a floor space of 100 square me­ters, a frus­trat­ing re­al­ity that Hong Kong peo­ple have long lived with.”

Sky-high home prices are press­ing builders in Shang­hai to re­de­fine lux­ury prop­erty by size, where the av­er­age price of a 90-square-me­ter home, if not lux­ury, has been about 25 times av­er­age house­hold in­come this year.

More than two years ago, lux­ury homes with a floor area rang­ing from 250 to 400 square me­ters used to be com­mon­place for the com­pany in Shang­hai. How­ever, with hous­ing fever show­ing no sign of cool­ing down over the past two years, the State-owned de­vel­oper is com­pelled to con­trol sell­ing prices by trim­ming the size to 200-210 or 130-140 square me­ters.

As of Novem­ber, the av­er­age price of flats in Shang­hai had reached 50,000 yuan ($7,278) per square me­ter, while houses priced at no more than 100,000 yuan per square me­ter could hardly be la­beled as “lux­ury”.

Up­graders who are in a hurry to re­place their small apart­ments with bet­ter ac­com­mo­da­tion have been the main­stay of pur­chasers. The hard fact is the in­fi­nite up­side po­ten­tial in Shang­hai’s home­buy­ing costs is low­er­ing peo­ple’s ex­pec­ta­tions for liv­ing space.

A batch of lux­ury flats in down­town Shang­hai, 100 square me­ters in size val­ued at 10 mil­lion yuan each, has proven to be highly sought-af­ter.

The com­pany said smaller lux­ury homes could well be a long-term trend, as Shang­hai is poised to emerge as a megac­ity in the fore­see­able fu­ture, dwarf­ing its peers like New York, Lon­don and Tokyo, both in terms of the size of city and hous­ing prices.

“There is a big chance for over­all home prices in Shang- hai to sur­pass those of Hong Kong. So it would be safe to say that house-buy­ing costs in Shang­hai will see room to climb,” said the builder.

Although pol­i­cy­mak­ers in the world’s sec­ond-largest econ­omy are grap­pling to cool the red-hot real es­tate mar­ket in first-tier cities, the de­vel­oper said a flurry of cool­ing mea­sures points to weed­ing out the un­reg­u­lated, highly in­debted prop­er­ties, rather than deal­ing a blow to nor­mal de­mand.

Such a be­lief made the com­pany re­it­er­ate its con­fi­dence in the coastal city’s prop­erty mar­ket.

But de­mand on a na­tion­wide level re­mains ro­bust, which un­der­lines the price sus­tain­abil­ity, in part be­cause buy­ers are not highly in­debted, and tend to in­vest for the long term and are un­likely to sell houses even if prices drop, four Har­vard aca­demics wrote in a work­ing pa­per last month.


Smaller lux­ury homes could be­come a trend in Shang­hai.

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