Savills China Research Shanghai Briefing Residential sales November 218 SUMMARY Image: Badaitou, Yangpu District Supply reached a two-year high as developers rushed to reach their year-end targets; first-hand average transaction price exceeded RMB5, per sq m for the first time. New commodity residential supply rebounded by 116% in /218 to 3.1, up 281% year-on-year (YoY). Average transaction prices rebounded by 9.6% quarter-on-quarter (QoQ) to RMB54,6 per sq m, up 17.1% YoY. First-hand, high-end apartment supply totalled 194, sq m in /218. This quarter saw a number of pre-sales licences being issued, which drove up the supply side. First-hand, high-end apartment transaction prices increased 3.2% on an index basis in /218 to an average of RMB97,3 per sq m. 17 for-sale residential land plots were transacted in /218, with a total GFA of 2.1 and an accommodation value (AV) of RMB22,2 per sq m. Among those deals, Qingpu and Baoshan districts saw most of the land plot transactions. New supply in the residential sales market is expected to grow by the end of this year, as developers look to hit sales targets amid shifting market expectations. Nevertheless, as more potential home buyers wait to see how the market moves, growth in transaction volumes could be limited. James Macdonald, Savills Research savills.com.cn/research 1
Market overview New commodity residential supply and transaction volumes continued to increase in /218. For the first time, the new commodity apartment average transaction price topped RMB5, per sq m. A large number of new projects were launched onto the market, pushing up unsold inventory levels to 5.9, up 12.7% QoQ and 9% YoY. Competition from the first-hand market, influenced by price caps and increased supply, meant that the second-hand residential average price decreased in /218. Overall commodity residential market First-hand market New commodity residential supply rebounded by 116% in /218 to 3.1, nearly triple the supply level YoY. First-hand commodity residential transaction volumes increased by 58.6%, totalling 2.3, up 38.7% YoY. All of the regions delineated by Shanghai s ring roads recorded increases in transaction volumes in /218. It is worth noting that total supply within the inner ring road increased significantly to 191, sq m, nearly triple the average quarterly supply of last year at 71, sq m. With the policy environment still strict and the government suppressing presale prices, developers are shifting their expectations and accelerating GRAPH 1 First-hand commodity residential market supply, transaction volume and prices, /28 /218 6 5 4 3 2 1 Supply (LHS) Transaction volume (LHS) Average transaction price (RHS) 28 29 21 211 212 213 214 215 216 217 218 Source: Shanghai PBOC; Savills Research GRAPH 2 Ring road regions supply, /212 /218 5. 4.5 4. 3.5 3. 2.5 2. 1.5 1..5. Inside inner ring rd. Between middle and outer ring rd. Outside suburban ring rd. 6, 5, 4, 3, 2, 1, 12 13 14 15 16 17 18 Between inner and middle ring rd. Between outer and suburban ring rd. TABLE 1 First-hand commodity residential market by property type, /218 Supply Transactions Average price sq m QoQ (%) sq m QoQ (%) RMB psm QoQ (%) Apartment 2,839,783 17.9% 2,132,123 69.8% 54,491 9.2% Villa 225,24 347.1% 165,714 (14.1%) 56,493 14.% Overall 3,64,987 116.4% 2,297,837 58.6% 54,636 9.6% 2
their sales cycles. Average transaction prices rebounded by 9.6% QoQ to RMB54,6 per sq m, up 17.1% YoY. Second-hand market Second-hand residential transaction volumes increased to RMB3.7 in /218, up 7% QoQ. Nevertheless, the average transaction price decreased 9.2% QoQ to RMB36,6 per sq m. The decrease might be due to the changing expectations of potential home buyers and sellers. As more of the population waits to see how the market shifts, more sellers are willing to lower their listed prices to shorten the selling process. With the market cooling, potential home buyers have strengthened their negotiation positions and feel less pressure to swiftly conclude transactions. High-end residential sales market First-hand, high-end apartment supply totalled 194,3 sq m in /218. New batches at Jing an Prime Land and One Riviera Park have added about 4 units to the market. Also, /218 witnessed a number of pre-sales licences being issued, which drove up the supply side. The first-hand, high-end apartment market recorded an increase in transaction volumes, rising 114% from /218 and totalling 312, sq m in /218. First-hand, high-end apartment transaction prices rose 3.2% QoQ on an index basis in /218 to an GRAPH 3 Second-hand residential sales market transactions and prices, /28 /218 12 1 8 6 4 2 Transaction volume (LHS) 28 29 21 211 212 213 214 215 216 217 218 Average transaction price (RHS) GRAPH 4 First-hand, high-end apartment market supply, /28 /218 sq m 6, 5, 4, 3, 2, 1, Primary Secondary Emerging 42, 35, 28, 21, 14, 7, /8 /9 /1 /11 /12 /13 /14 /15 /16 /17 /18 TABLE 2 Top five apartment projects by first-hand transaction prices, /218 Project District Area Transaction area (sq m) Average transaction price (RMB psm) Suhe Creek Zhabei Suhe Creek 276 29,16 Bund House Huangpu Huangpu Rivera 2,898 153,417 Lakeville Luxe Huangpu Middle Huaihai Road 27,435 139,945 One Jingan Jingan West Nanjing Road 7,331 135,17 Shanghai Arch Pudong Lujiazui Rivera 281 133,578 savills.com.cn/research 3
average of RMB97,3 per sq m. It looks like 218 is the year for residential sales in the East Bund area and North Lujiazui Riviera. Sharing the same section of the Huangpu River, Phili Regency ( 翡丽甲第 ), Bund Wonder ( 阳光城滨江悦 ) and CapitalBay ( 首创天阅滨江 ) along with One Riviera Park have been conducting pre-sales since /218. All of these developments are adding new supply to the high-end residential sales market. In the quarters to come, the area will see the launch of new supply from Badaitou, Nove Mansion ( 九庐 ) as well as Emerald Riverside ( 万科翡翠滨江 ) and Phili Regency. The quick pace of development offers several alternatives for high net worth individuals working in little Lujiazui. Residential land market A total of 17 residential land plots were transacted in /218, with a combined land area of 1 million sq m and a total GFA of 2.1 million sq m, leading to an AV of RMB22,2 per sq m. Among those transactions, Qingpu and Baoshan districts both enjoyed significant sales. GRAPH 5 First-hand, high-end apartment market transaction volumes and prices, /28 /218 sq m 4, 35, 3, 25, 2, 15, 1, 5, Primary transaction volume (LHS) Emerging transaction volume (LHS) Secondary price index (RHS) Secondary transaction volume (LHS) Primary price index (RHS) Emerging price index (RHS) 16 8 29 21 211 212 213 214 215 216 217 218 *Primary: Well-established luxury residential enclaves within the inner ring road (Middle Huaihai Road, Lujiazui Riverside, Xinhua Road, Century Park,etc.). Secondary: Developing high-end residential enclaves within the middle ring road (Suhe Creek, Dapuqiao, Gubei, Xuhui Riverside,Yangpu Riverside,Qiantan,etc). Emerging: Emerging high-end residential enclaves outside the middle ring road (Xinjiangwan Town, Sanlin, Waigaoqiao etc.). GRAPH 6 Shanghai first-hand, high-end residential projects distribution 15 14 13 12 11 1 9 8 / 21 = 1 Five residential for-lease land plots, located across Jiading, Songjiang and Yangpu, were transacted according to their reserve prices. These plots will bring the market a total GFA of 162, sq m. Two plots in Yangpu were bought by a subsidiary company of the Stateowned Assets Supervision and Administration Commission (SASAC). Surrounded by mature facilities and transportation, both plots will bring at least 937 new units to the rental market. Future Supply Supply in /218-/218 Jing an Prime Land Jinmao Palace Rong Mansion Suhe Creek First-hand high-end residential projects Huafa Mansion Phili Regency Capitalbay Bund Wonder Badaitou Emerald Riverside Nove Mansion One Riviera Park Residential sales market outlook New supply in the residential sales market should grow in /218, as developers look to hit sales targets amid shifting market expectations. Nevertheless, as more potential are First-hand residential prices are expected to remain relatively flat in /218 due to the first-hand residential price cap and the supply One Jingan Lakeville Luxe Dynasty on the Bund Yanlord on the Park 4
GRAPH 7 For-sale residential land transaction area (buildable area) and AV, /28 /218 5. 4.5 4. 3.5 3. 2.5 2. 1.5 1..5. Land transaction GFA (LHS) Accommodation value (RHS) 28 29 21 211 212 213 214 215 216 217 18 Source: Shanghai Municipal Bureau of Planning and Land Resources; Savills Research 4, 36, 32, 28, 24, 2, 16, 12, 8, 4, increase; second-hand residential projects, however, will enter a period of price adjustment. On September 19, nine departments, including the Shanghai Committee of Housing and Urban-Rural Development carried out a special inspection of the real estate market. The government focused on entities that release fake information, speculate, and act as illegal brokers and sellers in order to keep the market stable. With the market cooling, potential home buyers have strengthened their negotiating positions and feel less pressure to swiftly conclude transactions, preferring to carry out in-depth research first and focus on quality properties. Please contact us for further information Research Central Management Agency James Macdonald Senior Director China james.macdonald@savills.com.cn Siu Wing Chu Managing Director Central China siuwing.chu@savills.com.cn Shirley Tang Senior Director Shanghai shirley.tang@savills.com.cn Michelle Zhou Director China michelle.zhou@savills.com.cn Savills plc Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 6 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research. savills.com.cn/research 5