China’s mainland real estate market continues to be lackluster, with prices dropping in 70 cities nationwide. The luxury housing market has also experienced a significant transformation. Some of Shanghai’s top-tier luxury homes have been hit hard, with prices for properties worth over one billion yuan almost halved as homeowners anticipate a long-term downturn in the real estate market.
Shanghai’s real estate market has always been a focal point of national attention, with the luxury housing market particularly popular among high net worth individuals.
However, recent market performance has presented unprecedented challenges for the second-hand luxury home market. Even with discounts, some top-tier luxury homes are struggling to attract buyers.
Not only are second-hand luxury homes affected, but the supply of high-end properties in the new housing market is also increasing. In 2024, over 2700 units priced over 20 million yuan are expected to enter the market, doubling the supply compared to 2023. Combined with the impact of new policies, Shanghai has lifted the 10% cap on premium for residential land and the linkage price mechanism, leading to a slight increase in new housing prices and heightened competition in the second-hand luxury home market.
According to data released by China’s National Bureau of Statistics, in August this year, among 70 cities nationwide, only Shanghai and Nanjing saw a month-on-month increase in new home prices, with rises of 0.6% and 0.3% respectively, while Xi’an remained stable and the other 67 cities experienced declines.
One city saw a month-on-month increase in second-hand home prices (Jilin with a 0.1% rise), while 69 cities observed declines, adding two more cities than in July.
In first-tier cities, new home prices dropped by 0.3% month-on-month, while second-hand home prices fell by 0.9%, expanding by 0.4 percentage points compared to the previous month.
Overall, the selling prices of residential properties in various cities have decreased month-on-month.
In August, 68 cities saw year-on-year decreases in new home prices, as well as 70 cities for second-hand home prices.
In first-tier cities, new home prices fell by 4.2% year-on-year, remaining the same as in July, while second-hand home prices dropped by 9.4%, increasing by 0.6 percentage points compared to the previous month.
On the whole, the year-on-year decline in selling prices of residential properties in various cities has slightly widened.
A prominent financial influencer with 1.55 million followers, Ji Qingkemo, recently stated that overall, the property prices nationwide are at a low, with a general downward trend and still far from being fully adjusted.
Official data shows that in first-tier cities, the overall selling prices of new homes decreased by 0.3% month-on-month. Specifically, Beijing, Guangzhou, and Shenzhen saw declines of 0.5%, 0.5%, and 0.8% respectively, while Shanghai experienced a 0.6% increase. As for second-hand home prices, Beijing, Shanghai, Guangzhou, and Shenzhen witnessed drops of 1%, 0.6%, 7%, and 1.3% respectively.
Ji Qingkemo pointed out that whether it is new or second-hand homes, the focus should be on year-on-year data. Among first-tier cities, year-on-year prices for new homes in Beijing, Guangzhou, and Shenzhen decreased by 3.6%, 10.1%, and 8.2% respectively, while Shanghai increased by 4.9%. For second-hand homes in Beijing, Shanghai, Guangzhou, and Shenzhen, prices plummeted by 8.5%, 5.8%, 12.5%, and 10.8% respectively.
He highlighted that the drop in second-hand home prices in Shanghai by 5.8% reveals a significant trend. Ji Qingkemo further explained that although new home prices have increased, it does not directly benefit ordinary citizens. This upward movement is a strategic plan.
He emphasized that as long as the public sees Shanghai’s property prices rising, they may believe that the market has bottomed out and will continue to rise, which could influence Beijing. If people continue with this conventional thinking, it would indicate the success of this strategy.
While the trading volume of second-hand homes has significantly increased, prices for some luxury properties have notably dropped. Some properties in well-known communities have remained unsold even after discounts, reflecting a profound adjustment in the supply-demand relationship in the market.
Ji Qingkemo revealed that the luxury housing market in Shanghai has recently witnessed drastic changes. For instance, a flat of approximately 406 square meters in Green City Huangpu Bay No. 1 was initially priced at 108 million yuan but was sold at 68 million yuan, a reduction of 40 million yuan. The owner mentioned either needing cash urgently or having a long-term bearish view on the market. Reportedly, the property was sold within two and a half days.
He remarked, “The last transaction of this luxury home was at 120 million yuan. It was now sold for 68 million yuan. Will anyone buy it for a higher price in the future? The prices in the entire luxury housing area of Green City Huangpu Bay have been significantly reduced.”
Ji Qingkemo noted that while the luxury market does not directly involve ordinary people since the price reduction from 108 million yuan to 68 million yuan may not necessarily make it affordable for ordinary buyers. Luxury homes in Shanghai’s prime locations, such as Cuihu Tiandi, have seen a total price drop of over 30 million yuan, yet remain unsold. Prices for luxury homes in the World Trade Binjiang Garden have been nearly halved from their peak. A 214-square-meter luxury home in Zhonghai Jianguo Li has lost over 12 million yuan in value within a year.
He pointed out that the surrounding second-hand homes for these luxury properties were initially listed at over 20,000 yuan per square meter. By reducing the luxury homes directly to 170,000 yuan per square meter, they appear more appealing to buyers, artificially inflating Shanghai’s overall housing prices. He emphasized that the current economic environment does not support the ability of wealthy individuals who can afford million-dollar properties to need more houses. Therefore, linking the price increase of luxury homes to an overall rise in property prices is unrealistic, as the markets for luxury and standard housing operate under different conditions. It is crucial to understand the essence of the situation beyond surface phenomena.