Article,
Shanghai rebound on the way, say agents Luxury homes become prime focus for buyers
(2007-07-04 2007)Richard Ellis.
Abstract
"If not now, when?" That is the motto of some real estate agents who
say now is the time to buy luxury homes in prime areas of Shanghai
due to limited supply.
Although the central and city governments have repeatedly declared
their determination to regulate the property market, especially the
luxury sector, agents said there was a greater chance of seeing increased
luxury home prices in Shanghai than a decline.
Clement Luk, director and assistant general manager of Centaline (China)
Property Consultants, said potential investors should consider two
factors.
"Property prices in Shanghai have consolidated in the past two years
while other first-tier cities such as Beijing and Shenzhen surged,"
Mr Luk said. Also, supply of first-hand luxury homes in Shanghai
is scarce, he said.
According to the National Development and Reform Commission, prices
in Beijing and Shenzhen averaged 10 per cent growth in each of the
past five months.
However, in Shanghai average prices remained flat in the same period.
Still, if you believe that home prices in Shanghai will rebound, there
are some investment opportunities to be found.
Centaline (China) is acting for SRE Group in the sale of the remaining
units at its luxury residential project Richgate in Madang Road in
Shanghai's Luwan district.
Richgate comprises 108 units over five blocks ranging from 3,200 square
feet to 5,200 sqft. More than 80 per cent of units have been sold
since its launch in 2004.
"The project is in a prime location, which is just next to the Xintiandi
entertainment area," said David Hui, the deputy general manager of
Centaline (China) Property Consultants' Hong Kong branch.
On offer for Hong Kong buyers are two penthouses and one typical unit
and 12 special units. Each of the special units occupies the whole
floor, ensuring sufficient privacy for any new owner.
"Most of the units enjoy views of Xintiandi," Mr Hui said.
The average selling price of these units ranges from 20 million yuan
to 50 million yuan or 60,000 yuan to 80,000 yuan per square metre.
This compares to average prices of 50,000 to 60,000 yuan per square
metre for typical units at Lakeville Regency in Xintiandi, he said.
As the project is close to a number of grade-A office buildings in
Xintiandi, Mr Hui said it would be easy for the owners to find high-end
corporate tenants even though rental return at an estimated 4 per
cent was not high.
However, Mr Luk said some units could not be bought directly. They
are held by separate paper companies, meaning buyers could purchase
the unit only by acquiring the paper company's shareholding, he said.
And not all buyers feel comfortable buying shares rather than purchasing
the asset directly.
Mr Hui said the developer decided to sell the units in Hong Kong where
the city's super rich are keen on deluxe property assets.
"We are targeting Hong Kong businessmen who want it for their own
use or for investment," he said.
Hong Kong buyers are evidently showing great interest in Shanghai
luxury properties.
According to Indonesian conglomerate Salim Group, the developer of
Residence 8 - a twin-tower luxury residential property - more than
30 per cent of their buyers were from Hong Kong.
Residence 8 will have 308 units in its twin 31-storey towers containing
a mix of one, two, and three-bedroom units and seven penthouses.
Managed by a British boutique hotel operator, Palmerston Hotels &
Resorts, Residence 8 will be completed in the third quarter of next
year. The developer said more than 70 per cent of the units have
been sold since April.
Prices have averaged US$10,000 per square metre, equal to unit prices
of US$750,000 to US$13 million.
Two penthouses with a combined value of 75 million yuan have just
been sold to a Hong Kong investor and the developer is in talks to
sell a 805 sqmetre penthouse at 100 million yuan - a record price
this year in Shanghai's luxury residential market.
"Most of the buyers we see are from China and Hong Kong and Taiwan,
with the rest from Europe, the United States and American Chinese
returning to Shanghai," said David Chen, the senior director of residential
project marketing at CB Richard Ellis' Shanghai office.
"More than 30 per cent have been bought by Hong Kong investors, and
about 40 per cent from China," Mr Chen said.
