Shanghai steps up demand-side policy support

• Shanghai further relaxed HPR and housing credit policies in May to boost homebuyer confidence. Measures included easing homebuying curbs for non-local residents and reducing mortgage rates and down payment ratios for first- and second-home buyers.
• Shanghai’s primary home sales volume declined 30.2% y-o-y to 1.89 million sqm in Q2 2024 due to limited new supply. However, in the high-end segment, sales surged by 71.6% q-o-q to 1,786 units, driven by pent-up upgrading demand and increased supply.

High-end supply increases further in Q2 2024

• New home supply remained tight in Q2 2024, as the market only saw a total supply of 2.27 million sqm reach the market, down 18.3% y-o-y.
• Shanghai’s high-end residential market experienced a surge in new supply in Q2 2024, with nine projects and 2,019 units launched, presenting a 66.3% q-o-q and 45.4% y-o-y increase. Average prices ranged from RMB 133,000 to 178,000 per sqm.

High-end secondary prices see narrower decline

• Looser price caps led high-end primary prices to increase further by 1.2% q-o-q. Supportive policies boosted secondary market sales, leading to smaller price declines. Nevertheless, average secondary prices still dropped by 2.7% q-o-q in the quarter.
• In the leasing market, the ample supply of high-end residential projects continued to pressure rent growth. The average rent for high-end apartments in Q2 2024 was RMB 176.7 per sqm, down 1.2% q-o-q and 6.8% y-o-y.

Outlook: Looser policies expected to underpin sales recovery

• We expect Shanghai’s policy stance to remain relaxed, with potential additional support in the next 12 months. Recent measures will help restore homebuyer sentiment and drive a steadier recovery in home sales momentum in H2 2024.
• High-end primary prices are expected to rise further amid looser price caps. As Shanghai’s secondary home sales momentum continues to recover, we expect a deceleration in the decline of secondary prices.