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savills.com.cn/research 01
Briefing Residential sales October 2016
Savills World Research Shanghai
New commodity residential supply fell in the third quarter, down 43.7% quarter-on-quarter (QoQ) to 1.9 million sq m, down 47.8% year-on-year (YoY).
First-hand commodity residential transaction volumes rebounded 31.6% in Q3/2016 to 4.2 million sq m.
Average transaction prices increased 16.9% QoQ to a new high of RMB41,500 per sq m in the third quarter, the fastest pace of growth since 2008.
New high-end apartment supply totalled 226,600 sq m in Q3/2016. Two new high-end projects launched, namely Jing’an Prime Land by CR Land & Huafa Group, and Bund Wonder by Yango Group.
First-hand, high-end apartment transaction volumes totalled 330,600 sq m in Q3/2016, up 78.5% QoQ.
First-hand, high-end apartment transaction prices continued to rise, increasing by 3.8% on an index basis in Q3/2016, to an average of RMB87,700 per sq m.
Bidding on residential land plots was highly competitive, with premiums remaining high at an average of 132.5% in Q3/2016.
Despite recent rapid price growth and increasing unaffordability, Shanghai’s residential market is expected to remain one of the most attractive markets in China.
“Robust demand encouraged developers to continue to bid aggressively on new residential land plots, although higher land costs squeezed developers’ operating profit margins.” James Macdonald, Savills
Research
SUMMARYQ3 transactions were up 32%, with monthly volumes surging in August but later moderating during the September and October holidays.
Image: The Luxury Villa, Changning
02
Briefing | Shanghai residential sales October 2016
Market newsRumours circulating about the potential implementation of new regulations and restrictions in the Shanghai market at the start of September encouraged potential buyers to bring forward purchases. As a result, there was a pick-up in sales activity in August, spurring price growth, especially in the final week of the month.
The surge in sales volumes led to a decrease in unsold inventories, ending Q3/2016 at less than 7.0 million sq m from 10.8 million sq m by the end of 2015. The reducing inventory, together with an influx of high-end residential supply and increasing demand from households looking to upgrade their premises,
Source: Shanghai Real Estate Transaction Center; Savills Research
GRAPH 1
First-hand residential unsold inventory, Jan 2010–Sep 2016
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Unsold inventory (LHS) Digestion period (RHS)
caused average transaction prices to increase at a faster pace of 16.9% in Q3/2016.
Shanghai announced six measures to improve supervision and better regulate the market on 8 October 2016, including:• More commodity residential land supply, especially affordable housing (incl. talent apartment) and developers’ self-holding proportion• Strengthened supervision over developers’ financing source• Further regulating of pre-sales of properties• Imposing more serious punishment for illegal behaviour• Further regulating the loan market• Carrying out more policy analysis and interpretation for homebuyers
The Shanghai Property Exhibition, which is held annually over the October holidays and has taken place for the last 20 consecutive years, was unexpectedly cancelled this year in an attempt to “stabilise the market and drive the market back to rationality”.
Shanghai has fully implemented property registration rules from 8 October 2016, requiring all real estate properties in the city to be registered under a unified system. Property owners need to register their real estate ownerships instead of properties. This marks another step to better consolidate and unify registration and record keeping that has to evolve with the new market.Source: Shanghai Real Estate Trading Center; Savills Research
GRAPH 2
First-hand commodity residential market supply, transactions and prices, Q1/2006–Q3/2016
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Overall commodity1 residential marketFirst-hand commodity residential supply fell in the third quarter, down 43.7% QoQ to 1.9 million sq m, down 47.8% YoY.
The rumours about the potential implementation of new restrictions and regulations at the start of September led to a pick-up; +42% month-on-month (MoM) and +50% YoY in sales activity to 1.9 million sq m in August. This contributed to new commodity residential transaction volumes rebounding 31.6% in Q3/2016, to 4.2 million sq m.
Transaction prices unsurprisingly not only continued to increase but at a much faster pace of 16.9% QoQ to a new high of RMB41,500 per sq m in the third quarter, the fastest pace of growth since 2008.
With the rapid price growth outstripping rental growth, residential yields in the city continue to fall to record lows, with properties only generating 1.5% - 2.5%. Purchases are therefore not driven by buy-to-let investors but by end-users and investors expecting to make the majority of their returns through capital appreciation. An alternative for an investor more focused on yield could be commercial-titled residential products.
1 Commodity housing excludes residential properties designated for relocated residents under urban redevel-opment plans, as well as economical housing.
TABLE 1
First-hand commodity residential market by property type, Q3/2016
Supply Transactions Average price
sq m QoQ (%) sq m QoQ (%) RMB psm QoQ (%)
Apartment 1,630,800 -45.0% 3,417,800 +27.4% 43,000 +21.2%
Villa 236,100 -33.0% 804,400 +52.8% 34,800 -1.3%
Overall 1,866,800 -43.7% 4,222,200 +31.6% 41,500 +16.9%
Source: Shanghai Real Estate Trading Center; Savills Research
savills.com.cn/research 03
Briefing | Shanghai residential sales October 2016
GRAPH 3
Second-hand residential sales market transactions and prices, Q1/2007–Q3/2016
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GRAPH 4
First-hand high-end apartment market supply, Q1/2007–Q3/2016
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The rebound in sales activity was more noticeable in the second-hand residential market, with transaction volumes jumping 65.4% to 9.4 million sq m in Q3/2016, the second highest level ever recorded.
Second-hand residential prices continued their upward trajectory, up 6.4% on an index basis to an average of RMB33,200 per sq m in the third quarter, 25% lower than the first-hand price level. The gap may not be as large, however, as second-hand sales contracts often under-report the true value of the property.
High-end residential sales market2
First-hand, high-end apartment supply totalled 226,600 sq m in Q3/2016. Two new high-end projects launched, namely CR Land and Huafa Group’s Jing’an Prime Land in the Daning area, and Yango Group’s Bund Wonder in Yangpu Riverside, adding 478 and 278 new units (respectively) onto the sales market.
As a result of the stringent issuance of pre-sale certificates by the government, some highly-priced residential projects have had to postpone their launches and adjust down their asking prices until they have obtained approvals, as is also common in Beijing. The Shanghai government has also reiterated in
2 Judged by comprehensive criteria including location, building quality, total volumes, unit size, transaction price and property management.
Source: Shanghai Existing Property Index Office; Savills Research
Source: Shanghai Real Estate Transaction Centre, Savills Research *Primary: Well-established luxury residential enclaves within the inner ring road (Huaihai Road (M), Lujiazui Riverside, Xinhua Road, etc.). Secondary: Developing high-end residential enclaves within the middle ring road (Huamu, Dapuqiao, Gubei, etc.). Emerging: Emerging high-end residential enclaves outside the middle ring road (New Jiangwan Town, Sanlin, Waigaoqiao, etc.).
TABLE 2
Selected launch of high-end apartment supply, Q3/2016
Project (EN) Project (CN) Launch date Area District Developer Launch
unitGFA
(sq m)
No. of units sold in new
batches
The E18, 3rd batch 滨江壹十八, 第3批 Aug Primary Pudong Wharf 96 31,722 23
Dynasty on the Bund, 5th batch 新世界花园, 第5批 Jul Secondary Huangpu New World 136 30,030 54
Shanghai Bay, bldg. 13-14# 尚海湾豪庭, 北块13-14# Jul Secondary Xuhui Glorious 392 59,564 104
989 Xikang Rd., 4th batch 西康锦城, 第4批 Jul Secondary Putuo OCT 32 7,372 25
Jing’an Prime Land 静安府 Jul Secondary Jing’an CR Land, Huafa 478 61,931 251
Bund Wonder 阳光城滨江悦 Jul Emerging Yangpu Yango 278 35,233 126
Source: Shanghai Real Estate Transaction Centre, Savills Research
the recent ‘six measures’ aimed at curbing housing prices that it will further regulate the pre-sales of properties.
First-hand, high-end apartment transaction volumes totalled 330,600 sq m in Q3/2016, up 78.5% QoQ, a faster rate compared with a QoQ rebound of 31.6% in the first-hand mass market.
First-hand, high-end apartment transaction prices continued to rise, increasing by 3.8% on an index basis in Q3/2016, to an average of RMB87,700 per sq m.
Satisfactory sales performances were recorded in the two newly-launched projects. A total of 251 out of 478 new units had been sold in the Jing’an Prime Land by the end of Q3/2016, with transaction prices averaging RMB85,000 per sq m. During the same period, Bund Wonder saw 126 out of 278 new units sold, with an average transaction price of RMB95,000 per sq m.
Project focusJing’an Prime Land (静安府)
04
Briefing | Shanghai residential sales October 2016
GRAPH 5
First-hand high-end apartment market transactions and prices, Q1/2007–Q3/2016
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Source: Shanghai Real Estate Transaction Centre, Savills Research
Located in the Daning area in the Jing’an district, Jing’an Prime Land is a brand new, high-end residential project jointly developed by CR Land and the Huafa Group. The project is located next to the Wenshui Road Metro Station (line 1) and is close to the Middle Ring Road and North-South Elevated Road.
The project is built on Plot 09-03 and 10-03, which were acquired by the joint venture of CR Land and Huafa Group in March and June 2015, respectively, for a total consideration of RMB15.8 billion, with AVs reaching RMB38,000 and RMB35,000 per sq m. The development has a total planned GFA of 433,000 sq m, which will be built into 54 residential buildings totalling 2,835 units.
In July 2016, the project launched its first batch, adding 478 apartment units, totalling 61,900 sq m, to the sales market. The main offerings were three- to four-bedroom (95-135 sq m) units. A total of 251 units were registered as sold by the end of Q3/2016, with transaction prices averaging RMB85,000 per sq m.
The first batch of fully-fitted units is expected to be handed over at the end of 2017.
Residential land marketFourteen residential (including purely residential and mixed-use) land plots were transacted in Q3/2016, totalling 1.3 million sq m of buildable area.
Average AV jumped again to RMB39,500 per sq m in Q3/2016, up 37.6% QoQ. Rongxin Group, a Fujian developer, acquired a mixed-use (90% residential; 10% commercial) land plot in the Jing’an district for RMB11 billion, an AV of RMB100,200
per sq m, the highest ever recorded in China. Another notable land deal was the acquisition by Future Land of a residential land plot in the Liangcheng area, Hongkou district, for a total consideration of RMB3.7 billion or an AV of RMB67,400 per sq m.
Bidding on residential land plots proved highly competitive, with premiums remaining high at an average of 132.5% in Q3/2016,
Project District Area Transaction area (sq m) Average transaction price
Apartment
Tomson Riviera Pudong Lujiazui Riverside 595 231,800
Shanghai Arch Pudong Lujiazui Riverside 688 162,900
Suhe Creek Jing’an Suhe Creek 2,132 142,200
Xijiao 299 Changning Xijiao 6,055 138,500
The Paragon Huangpu Huaihai Road (M) 951 135,000
Villa
One Park Changning Gubei 855 245,500
Xijiao 299 Changning Xijiao 741 178,500
Forbes Park Changning Gubei 850 144,700
Dongjiao Yi Hao Pudong Dongjiao 538 139,400
Park Mansion Pudong Yangjing 1,121 133,500
TABLE 3
Top five residential projects by first-hand transaction prices, Q3/2016
Source: Shanghai Real Estate Transaction Centre, Savills Research
savills.com.cn/research 05
Briefing | Shanghai residential sales October 2016
Please contact us for further information
Savills plcSavills 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 700 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.
James MacdonaldDirector+8621 6391 [email protected]
Siu Wing ChuDeputy Managing Director+8621 6391 [email protected]
Shirley TangSenior Director+8621 6391 [email protected]
Project & Development Consultancy
Kitty TanDirector+8621 6391 [email protected]
Research Agency
TABLE 4
Top five residential land deals by AV, Q3/2016
Plot name District Site area (sq m)
Buildable area
(sq m)Plot ratio
Transacted price (RMB
million)
AV(RMB psm)
Premium(%) Developer Date
中兴社区n070202单元332-01-a, 333-01-a地块 Jing’an 31,034 109,861 3.5 11,010 100,218 139 Rongxin 17-Aug
凉城新村街道073-06号地块 Hongkou 19,960 54,889 2.8 3,700 67,409 77 Future Land 14-Jul
顾村镇n12-1101单元06-01地块 Baoshan 70,210 126,379 1.8 6,790 53,727 115 COFCO,
C&D, BCD 17-Aug
新江湾城n091101单元a4-01(b3)地块 Yangpu 39,806 59,709 1.5 3,155 52,840 51 Rongxin 29-Jul
徐泾镇徐南路北侧08-04地块 Qingpu 8,320 13,313 1.6 600 45,070 165 SCE 17-Aug
Source: Shanghai Real Estate Transaction Centre, Savills Research
Source: Shanghai Real Estate Transaction Center; Savills Research
GRAPH 6
Residential land transaction area (buildable area) and AV, Q1/2007–Q3/2016
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evidence of developers’ sustained confidence in the Shanghai market. In addition, new financing from banks and developers’ partners has also aided in pushing up pricing.
Residential sales market outlookLocated in Yangpu Riverside, Ba Dai Tou Residence by Portman Group and Zhongwei Real Estate is scheduled to launch at the end of 2016, with asking prices starting from RMB120,000 per sq m. Additionally, Lakeville Luxe, the fourth phase of Shui On’s residential development in the Xintiandi area, is expected
to launch its second batch of 50 apartment units in the fourth quarter, with asking prices expected to reach RMB200,000 per sq m.
Barring any unforeseen regulations, healthy transaction volumes are expected towards the end of the year, although there may be a slight slowdown in volumes in the short term as some purchases were brought forward to August in anticipation of new regulations.