APPD Market Report Article


December 1, 2021


RMB 165.4


Demand from first-time homebuyers and upgraders stays strong

  • Despite rising mortgage rates and continued tightening of home purchase restrictions (HPRs), Shanghai’s sales momentum stayed solid as 56% of newly launched projects overperformed in terms of pre-commitment rates. That said, given the quarter’s limited new supply, mass market primary sales volumes edged down 3.9% q-o-q.
  • The high-end segment saw upgraders’ demand remain buoyant under continued price caps. A total of 760 high-end units were sold in the quarter, up 56.1% q-o-q. Buying momentum also was strong in three new projects launching this quarter, which achieved high sales rates on their first launch dates.

Supply declines amid pandemic concerns

  • Shanghai postponed projects’ launch schedules and pre-sale permits for new projects due to a rebound in COVID-19 in China, leading to a relative shortage of supply in the third quarter. In the mass market, a total of 1.6 million sqm of new supply launched, down 37.8% q-o-q and 42.7% y-o-y.
  • In the high-end segment, three projects launched in the quarter. The projects supplied 376 units with average prices ranging from RMB 115,000 to RMB 136,000 sqm, and were well-received by upgraders.

Secondary price growth decelerates amid price verification policy

  • Given limited new supply and good buying demand, high-end primary prices edged up 0.8% q-o-q. Nonetheless, buying momentum in the secondary market slowed under tighter mortgage policies, and price growth decelerated to 1.4% q-o-q amid the city’s tougher price verification policy.
  • Rising rental requirements from new domestic demand drivers such as small business owners and family tenants added fuel to the rental market. Strong demand led average rents to increase 2.9% q-o-q (8.4% y-o-y) to RMB 165.4 per sqm per month.

Outlook: Primary projects to be favoured by homebuyers

  • Greater supply is expected in 4Q21. Although HPRs are expected to remain tight, the recent relaxation of the shortlisting ratio for first-hand home purchasing thresholds means that more buyers will qualify to purchase new homes. As such, price-capped primary projects will continue to be favoured by homebuyers over secondary projects.
  • We expect high-end primary prices largely to be stable in the coming quarters given government-imposed price caps. Meanwhile, secondary price growth is expected to further slow amid tighter mortgage policies, new price verification policies, and primary market activity diluting secondary market demand.

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

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