Real Estate Prices Have Fluctuated In China’s Metropolitan East, But Signs Of Recovery Are Starting To Surface
Although news coming out of emerging markets seems to be more rosy than that of their more developed counterparts, China itself has not been unaffected by the global economic downturn. Prices of hard assets like real estate have been hit particularly hard in some cities, like Beijing and Shanghai, where strong demand over the last several years has created something of a “bubble,” yet not as severe as those found in California or Florida. However, as China’s economy begins to head north again, several real estate experts have written on the resiliance of the real estate markets in China’s most important economic centers. In Shanghai alone, Shanghai Uwin has put out a study indicating that more than 1 million sqm of new homes, excluding those designated for relocated residents due to urban redevelopment projects, were sold across the city during the first 15 days of this month, up 12 per cent from the same period in May. This indicates that the city’s real estate market is, gradually, gaining steam again.
The important thing to keep in mind when trying to conceptualize the Chinese market is that many of the buyers in cities like Shanghai, Shenzhen, Guangzhou, or Beijing are first-timers, and tend to be on the cautious, young side. Since China’s economic power centers are concentrated on the east coast, in only a handful of huge metropolises, real estate is virtually always going to be in relatively short supply and relatively high demand. The population size — and economic and employment realities — guarantees this. So even in a comparatively sluggish market, when many younger people are finding it harder to settle down, real estate in Shanghai and Beijing is still going to perform pretty well.
Uwin, a Chinese real estate information service company, has produced an excellent summary of the real estate market in Shanghai for the months of May and June. According to their study, the sector of real estate that should be least affected by macroeconomic issues — high-end housing — performed incredibly well so far this month:
Lu Qilin, a researcher at Uwin, said, “While overall sentiment continued to be strong, demand for high-end homes, priced above £2,700 per square metre, become even more robust.”
According to Uwin, 58,100 square metres of high-end homes changed hands in Shanghai at an average price of £3,982 per sqm during the first 15 days of June.
That compared to 57,300 square metres of such homes sold at £3,652 per sqm in the same period a month earlier.
Uwin also confirmed that demand for property in China is also growing among overseas nationals, with 10per cent of all property sales in the city going to overseas buyers between Aril and May.
Additional research from E-House (China) Holdings Ltd showed transactions of luxury homes with a price tag of more than £3,650 per square meter rose 51 per cent to 107 units during the first 15 days of the month.
The second-hand market also appreciated, with sales up 15 per cent during the same period.
It will be interesting to track these results and see whether they fit with the real estate markets in other major cities. As the Chinese economy starts to gain stronger footing in the remainder of the year, and China’s economic stimulus package continues to gain traction, my hunch is that middle-class housing will start to gain ground as well. Since home ownership is a major priority for younger couples in China, and these couples’ families tend to lend a hand, I think the Chinese real estate market will continue to fluctuate as most markets naturally do, yet the population size and inherent, steady demand will ensure that property markets in Beijing, Shanghai, Guangzhou, and even second-tier cities like Nanjing, Suzhou, Changsha and Chongqing will continue to tick upward — hopefully not so much as to create a property bubble in the future, though.