Shanghai's luxury housing market is popping and it could be a sign Chinese property is coming back
Estate agent Knight Frank released its quarterly Global Prime Cities Index on Tuesday. It shows strong price growth in Shanghai for prime properties - the most expensive 5% of housing. Prices in this bracket grew by 10.7% on last year in the quarter to the end of September.
Knight Frank says demand in Shanghai is being driven by "the reversal of strict housing policies, and the introduction of new fiscal measures."This includes the recent cut in interest rates from the People's Bank of China and an easing of the requirements for mortgages.
These government interventions are meant to kick-start China's faltering economy. Growth slowed to its lowest rate for two decades in 2014, and the country's stock market is hugely volatile. The Shanghai Composite has fallen more than 25% in the past six months.
The housing market is not exactly booming either. As reported by Business Insider, a recent note from Bank of America Merrill Lynch pointed out that in September, transaction volumes for housing were pretty much flat, growing just 0.1%.
But it seems like government intervention is at least working in the top end of the Shanghai market. Price growth is accelerating - the 10.7% rise for the third quarter compares to growth of just 2.9% in the first quarter and 7.3% in the second.
Sales volumes are rising too. Property Report states there was an 18.8% increase in square feet of Shanghai property sold to 238,310 sq/m from the second to the third quarter.
Shanghai's buoyant prime housing market could reflect a broader revival of the Chinese property market. On Monday Reuters reported on two surveys showing prices in China's wider housing market picked up in October.A poll from Real Estate Information Corporation, a property services firm, showed that prices for new homes across 288 cities in the country went up by 1.4% year-on-year in October. Another survey, from the China Real Estate Index System (CREIS), has prices in the 100 biggest cities up by 2.1%.
CREIS said in a statement: "With the continuously loosening policy environment, housing demand will increase steadily in coming month."
Investors are also expecting a longer term boost to China's property sector from last week's abandonment of the one-child policy, which has been in place since the 1970s. Stocks in Chinese property developers jumped on the news.
Knight Frank's quarterly report also showed strong price growth in Vancouver and a continued slump in Singapore.