APPD Market Report Article

Shanghai

August 26, 2022

Daniel Yao, Head of Research, China

3.4%

RMB 174

Growth
Slowing

Sale activities resume gradually in June

  • Sale activities were halted in April and May as project sites and trading centres remained closed during the outbreak. After most pandemic prevention measures were lifted in June, social distancing has continued to be enforced, with buyers being guided to make their purchase online. Total sales volume for the quarter slumped 52.4% q-o-q and 49.5% y-o-y, to about 1.3 million sqm.
  • As the rate of sale transactions accelerated in June, many high-end transactions that had been in progress at the end of 1Q22 were completed via online buying systems in 2Q22. As a result, high-end sales rebounded sharply in June. A total of 1,239 high-end units were sold in the quarter, up 15.9% q-o-q and 154.4% y-o-y.

Delay of new launches to 2H22

  • Only about 1.1 million sqm was launched in the market in 2Q22, down 60.7% q-o-q and 57.8% y-o-y, as a result of the outbreak. Most of the new supply was launched in June as Shanghai began its return to normal.
  • There was no new high-end supply in the quarter. Some projects that had been scheduled were postponed to later quarters amid the outbreak. Competition may rise further in 2H22 as the government plans to accelerate new launches by shortening the approval process.

Prices unchanged as sale activities resume late in the quarter

  • Primary and secondary prices held stable at RMB 126,500 per sqm and RMB 107,300 per sqm respectively, as sales activities were frozen in April and May. Since pandemic prevention measures were lifted in June, Shanghai’s housing market entered a state of gradual recovery amid continued COVID-19 restrictions, with many buyers and homeowners adopting wait-and-see attitudes.
  • Leasing activity recovered in June, driven by leasing demand from upgraders pursuing larger living spaces, higher-quality residential compounds and better property management. As a result, average rents in the high-end segment edged up 0.3% q-o-q in 2Q22.

Outlook: Upgrading demand to underpin sales recovery in 2H22

  • As Shanghai returns to normal, the housing market is expected to regain confidence and recover gradually in 2H22. Shanghai’s effort to relax its residency policy for fresh graduates, in order to attract talents with solid housing demand, will likely support sales in the coming quarters.
  • Primary prices are expected to stay largely stable in 2H22 as price caps remain in place. High-end secondary prices are likely to see mild growth in 2H22 as people’s experiences in the outbreak have generated demand to upgrade to high-end residential compounds with better property management.

Note: Shanghai Residential refers to Shanghai's high-end residential market.

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