Beijing’s curbs on how much developers can charge for homes has helped ignite sales, especially at the upper end of the market, as buyers snapped up nearly 500 flats at a prime project in Shanghai at prices 10 per cent lower than a similar development.
The sale, at CK Asset Holdings’ Upper West Shanghai project, bodes well for other prime projects with artificially low prices, analysts said.
CK Asset, which has two projects underway in Shanghai, netted 4.3 billion yuan (US$621 million) in the three days to Monday by selling 484 units, or 43.7 per cent of the 1,108 flats on offer at Upper West Shanghai, the company said.
The average selling price of 90,000 yuan per square metre is 10 per cent lower than the 100,000 yuan per square metre in a nearby project that sold early last year.
“The prices could be much higher without the government’s price curbs. There is a general rule that a new project cannot sell at an average price higher than similar nearby projects launched earlier,” said Lu Wenxi, Centaline's senior research manager in Shanghai.
The pricing restrictions will have a limited impact on CK Asset, as it acquired the site in 2006 for 3,055 yuan per square metre.
Lu said the Monday result is “not bad” considering the number of flats on offer and the big lump sum required to buy each one.
Property developers sold 25 per cent of the flats they offered in Shanghai last month, a measure also known as a sell-through rate, according to property consultancy CRIC. CK Asset’s result of 43.7 per cent sell-through rate was comparatively high, analysts said.
Shanghai’s property market has been in the doldrums for the past two years, as a large number of new launches in outlying areas has provided potential buyers plenty of options.
More than two-thirds of Shanghai’s housing is located outside the Outer Ring Expressway, which is considered an outlying area. About 15.7 per cent of supply lies between the inner and outer ring. The average price for new homes in Shanghai in May dropped 0.2 per cent to 46,960 yuan per square metre, according to China Index Academy.
The Upper West Shanghai project is comprised of residential units, offices, service apartments, a shopping centre and a hotel. It is located in Shanghai’s Putuo district at the intersection of metro line 11 and a new metro line under construction.
During Monday’s sale nearly all four-bedroom units on offer were sold, as the units, each costing about 13 million yuan, proved popular among wealthy buyers.
Roughly half of the units in the project are in layouts ranging from 82 to 85 square metres. These units were priced at just under 7.5 million yuan.
Remaining units will be offered for sale this coming weekend.
Lancy Zhou, a manager with a private equity fund in Shanghai, said he was attracted to the project because of its proximity to the downtown area and reasonable prices.
“A home in the city’s near downtown area is price-drop-proof in a downturn,” he said.
He said the project was also attractive for the low deposit at purchase of 100,000 yuan.
CK Asset also offered generous commissions to agents.
“There was a time when every agent I know recommended me Upper West Shanghai,” Zhou said.
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