APPD Market Report Article

Shanghai

November 29, 2022

Daniel Yao, Head of Research, China

1.1%

RMB 175

Growth
Slowing

Buying momentum recovers amid a looser credit environment

  • Amid a looser monetary policy environment and a lower loan prime rate (LPR), home sales recovered after the release of pent-up demand that built up due to the COVID-19 outbreak in 1H22. Combined with increased supply in the quarter, total sales volume rose 188.4% q-o-q (51.6% y-o-y) to about 3.7 million sqm.
  • In the high-end segment, the buying momentum remained solid due to stable upgrading demand. Nevertheless, only 732 high-end units were transacted, mainly caused by reduced high-end supply over the quarter.

Mass market sees a wave of supply

  • After the spring outbreak, Shanghai’s government adjusted supply-side policies by accelerating the pre-sales permitting process to support developers’ cash flow and satisfy pent-up demand. As a result, the quarter saw a supply surge with about 3.6 million sqm launched, up 235.3% q-o-q and 127.5% y-o-y.
  • Only two high-end projects, Suhe Century located at Suhe Creek and Oriental Magnolia located at Qiantan, supplied 785 units in total to the market in the quarter. Both buildings achieved high pre-commitment rates and were nearly sold out, aided by limited competition in the high-end market in the quarter.

Primary prices edge up

  • Primary prices rose 0.4% q-o-q to RMB 126,700 sqm amid looser supply side measures. In the secondary market, properties with larger unit layouts and high-end residential compounds were popular with upgraders. As a result, high-end secondary prices surged 1.3% q-o-q to RMB 108,700 per sqm.
  • The high-end leasing market remained resilient due to higher demand driven by families looking for spaces near schools before the start of a new semester, as well as upgraders seeking spacious units after the recent COVID-19 outbreak. As a result, average rents edged up 0.6% q-o-q.

Outlook: High-end sales in 2022 to exceed 2021 levels

  • Shanghai’s local housing market is likely to remain tight through end-2022. However, 2022’s annual high-end sale volumes are expected to exceed those of 2021, underpinned by upgrading demand.
  • Primary prices are expected to edge up in 4Q22 amid slight easing in supply-side policies. In the secondary market, sales activity is expected to slow in the coming quarter, given that most pent-up upgrading demand was released in 3Q22. Secondary price growth for 2022 is forecast to moderate from its 7.2% pace of increase in 2021.

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

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