APPD Market Report Article

Shanghai

February 28, 2022

8.7%

RMB 166

Rents
Rising

Sales momentum improves amid mortgage easing

  • With a slight easing in mortgage policies towards the year end, primary mass market sales in Shanghai edged up by 5.1% q-o-q to 2.5 million sqm in 4Q21. The year concluded with an annual sales volume of 10.7 million sqm, up 14.1% y-o-y to be the highest annual figure in the past five years.
  • In the high-end primary market, solid upgrade demand and the launch of many new projects contributed to sales of 1,105 high-end units, up 45.4% q-o-q. For the full year of 2021, high-end sales totalled 3,244 units, the highest level since 2017.

Quarterly high end supply reaches highest level in a decade

  • The fourth quarter saw a large volume of supply as developers accelerated new launches to achieve annual sales targets. In the mass market, new supply reached around 3.1 million sqm in 4Q21 and 8.1 million sqm for 2021 as a whole, up 4.5% y-o-y.
  • In the high end segment, ten projects launched 1,885 units in 4Q21, the largest quarterly supply observed in the past ten years. The new projects had average prices ranging from RMB 102,000 to RMB 165,000 per sqm, with most projects achieving high sales rates on the day of launch.

Primary prices stabilise while secondary prices cool down

  • With price caps remaining tight, high end primary prices edged up only 0.1% q-o-q. Meanwhile, the high end secondary market further cooled, with prices declining 1.2% q-o-q as price verification continued to be enforced and large new supply enticed buyers away from the secondary market.
  • Despite a seasonal slowdown in 4Q, strong leasing demand over 2021 overall led to 8.65% y-o-y growth in rents, the fastest growth in ten years. In the land sales market, 95 residential parcels were sold in 2021. With land premium rate caps, the average land premium rate was recorded at 6.15% in 2021, down from 13.7% in 2020.

Outlook: Housing policy to remain tight while monetary policy to ease

  • Shanghai’s housing policy stance will remain tight in 2022, although looser monetary policy is expected. We expect sales volume in the mass market to remain stable, underpinned by solid demand from first time buyers and upgraders. High end sales volume is likely to moderate due to a limited supply pipeline.
  • Given continued price caps, we expect high end primary prices to be stable with mild increases in 2022. Meanwhile, high end secondary price growth is expected to stabilise after the slight dip of 4Q21, due to a looser mortgage easing policy and limited primary high end supply.

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

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