Savills World Research

Briefing Residential sales November 2015

Image: The Palace II, Xuhui SUMMARY Looser monetary policies and improving sentiment are bringing end-users and investors back to the market, spurring residential sales volumes to new heights and pushing up prices.

 New commodity residential supply  High-end apartment transaction increased 24.2% quarter-on-quarter volumes totalled 335,400 sq m, down “Developers took advantage of (QoQ) to 3.6 million sq m in Q3/2015. 15.5% QoQ, though still close to the all-time high. the surge in sales and prices  First-hand commodity residential transaction volumes totalled 4.0  First-hand high-end apartment to release additional supply million sq m in Q3/2015, down 3.3% transaction prices increased 0.8% in over the September/October QoQ. Q3/2015, to an average of RMB71,700 per sq m. sales period. Additional sales  Average transaction prices stayed  Ten residential (including pure at the high-end of the market firm, with only a 0.3% QoQ decrease residential and mixed-use) land plots to RMB32,000 per sq m. were transacted in Q3/2015, totalling were largely driven by the 1.3 million sq m of buildable area, up  One new high-end apartment 20.7% QoQ. addition of more affordably project, The E18 by Wharf Holdings in , was launched in the third  Buoyant demand is expected to priced properties in secondary quarter, adding 145 new units (34,900 continue through to the fourth quarter areas.” James Macdonald, Savills sq m) to the sales market. of 2015. Research

savills.com.cn/research 01 Briefing |Shanghai residential sales November 2015

Policy and is not expected to lower it, given that the minimum down payment PBoC continues to lower interest the local government’s stance on for first-time homebuyers was cut rates controlling price increases. from 30% to 25%. The reduction The People’s Bank of (PBoC) applies to those receiving loans from announced further interest rate cuts China cuts minimum down commercial banks for the purchase on 26 August and 24 October, as payment for first-time homebuyers of properties in cities that no longer the government looks to reassure PBoC and the China Banking have Housing Purchase Restrictions markets and shore up the economy. Regulatory Commission (CBRC) (HPR), namely all cities apart from the The one-year lending rate was announced on 30 September, 2015, four first-tier cities and Sanya. lowered to 4.35%, while the five-year lending rate was cut to 4.9%, both GRAPH 1 historical lows. Base lending rate > 5 yr 1-5 yr < 1 yr 8.0%

The cumulative decreases in interest 7.5% rates, coinciding with the reduction 7.0% of Bank Reserve Requirement Ratio 6.5% (RRR), have made more financing available to home purchasers, 6.0%

especially low-income households, 5.5%

and had a positive impact on 5.0% developers’ liquidity as well as 4.5% funding costs. 4.0%

Second mortgage down payment under HPF lowered to 20% Source: People's Bank of China, Savills Research In August 2015, the Ministry GRAPH 2 of Housing and Urban-Rural Shanghai mortgage volumes and residential sales Development (MOHURD), Ministry values of Finance (MOF) and PBoC jointly Housing loans increase Sales values announced a lowering of the 24 160

minimum down payment from 30% 21 140

to 20% for second-home purchases 18 120 using the Housing Provident Fund 15 100

(HPF). The policy applies to those RMB billion 12 80 who have already paid down 9 60

their first-home mortgage in full. RMB billion

6 40 The policy went into effect on 1 September 2015; however, the four 3 20 first-tier cities are allowed to decide 0 0 whether or not to follow this policy -3 -20 or to set their own limits. Shanghai

has kept the requirement at 30% Source: Shanghai Real Estate Transaction Centre, Savills Research

TABLE 1 First-hand commodity residential market by property type, Q3/2015

Supply Transactions Average price

sq m QoQ (%) sq m QoQ (%) RMB per sq m QoQ (%)

Apartment 3,198,600 +24.7 3,516,100 -3.2 31,600 +0.5

Villa 374,700 +20.0 491,200 -3.7 34,500 -4.9

Overall 3,573,300 +24.2 4,007,300 -3.3 32,000 -0.3

Source: Shanghai Real Estate Transaction Centre, National Bureau of Statistics, Savills Research

02 Briefing |Shanghai residential sales November 2015

Loosening of the one child policy the further lower mortgage rates Benefitting from seasonal factors On 29 October, 2015, the which led to new housing loans in and continued monetary loosening, government announced that it would Q3/2015 hitting the highest monthly first-hand commodity residential loosen the one child policy in order record for the last five years. transaction volumes totalled 4.0 to allow all parents to have up to two children. The one child policy Buoyant sales volumes have GRAPH 3 was introduced in the late 1970s and heartened downbeat developers, First-hand commodity residential limited most urban couples to one giving them hope that they will reach market supply, transactions and child and most rural couples to two or even exceed their annual sales prices, Q1/2006–Q3/2015 children, if the first child born was a targets. At the recent Shanghai Supply (LHS) Transaction volume (LHS) Average transaction price (RHS) 7 35,000 girl. In recent years, the policy had Property Exhibition held over the been relaxed to first let parents have National Day holidays, potential 6 30,000 a second child if they were both an homebuyers showed the same high 5 25,000 RMB per sq m sq per RMB

only child, and then in 2013, couples enthusiasm, despite fewer discounts 4 20,000 were allowed to have two children if on offer. A number of developers either parent was an only child. have also launched new batches of 3 15,000

million sq m units at notably higher pricing than 2 10,000

While believed to be a positive for the earlier batches. 1 5,000 property market as parents look to 0 0 buy bigger homes to accommodate A combination of factors, including Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 their larger families, the relaxation of the stabilisation of prices and a Source: Shanghai Real Estate Transaction Centre, Savills Research the one child policy is expected to structural shift in transaction make- have only a muted impact and one up, resulted in first-hand commodity GRAPH 4 that may not be realised immediately. residential transaction prices First-hand commodity residential Parents have to weigh the financial falling 0.3% QoQ to an average of transaction prices (3MMA), Jan 2006– cost of having a second child, while RMB32,000 per sq m in the third Sep 2015 Inside Inner Ring Rd. Between Inner and Middle Ring Rd. many couples were already eligible quarter, although this was still close Between Middle and Outer Ring Rd. Between Outer and Suburban Ring Rd. Outside Suburban Ring Rd. to have a second child under the to all-time highs. 80,000 previous changes. 70,000 1 60,000 Overall commodity Market overview residential market 50,000 Benefitting from seasonal factors As developers accelerated the 40,000 RMB per sq m and monetary loosening, Shanghai’s launch of new products during the 30,000 residential sales market maintained traditionally peak season, September 20,000 robust demand in the third quarter, saw supply reach 1.8 million sq m, 10,000 0 despite falling 3.3% from Q2/2015, the highest monthly figure since Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 a five-year transaction volume high. 2007. As a result, new commodity Source: Shanghai Real Estate Transaction Centre, Savills Research Transaction volumes in the first three residential supply for Q3/2015 was quarters of 2015 stood at 10.1 million up 24.2% QoQ to 3.6 million sq m. GRAPH 5 sq m, having already surpassed sales First-hand residential unsold 1 Commodity housing excludes residential proper- for full-year 2014 (9.8 million sq m). ties designated for relocated residents under inventory, Jan/08–Sep/15 urban redevelopment plans, as well as economical Unsold inventory (LHS) Digestion period (RHS) The strong demand coincided with housing. 14 14

TABLE 2 12 12

Second-hand residential market by property type, Q3/2015 10 10

Transactions Average transaction price 8 8 months

6 6 sq m QoQ (%) RMB per sq m QoQ (%) million sq m

Apartment 7,434,700 -6.3 25,410 +2.3 4 4

Villa 379,200 -3.1 27,728 -0.6 2 2

Overall 7,813,900 -6.1 25,522 +2.2 0 0 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Source: Shanghai Real Estate Transaction Center, Savills Research Source: Shanghai Real Estate Transaction Centre, Savills Research

savills.com.cn/research 03 Briefing |Shanghai residential sales November 2015

GRAPH 6 million sq m in Q3/2015, down 3.3% while transaction prices between 2 Second-hand residential sales market QoQ but still the second-highest level Inner & Middle Ring Road averaged transactions and prices, Q1/2007– recorded over the past five years. RMB62,700 per sq m. Q3/2015 Fringe transaction volume (LHS) Non-core district transaction volume (LHS) Core district transaction volume (LHS) Overall average price (RHS) Demand has consistently exceeded Core district price (RHS) Non-core district price (RHS) Unsold inventory levels Fringe district price (RHS) 9 45,000 supply since the beginning of the Unsold inventory levels have fallen 8 40,000 year, while average transaction prices since the start of 2015, as a result 7 35,000 increased from Q4/2014 by 11.9% to of strong demand on the back of 6 30,000 RMB per sq m sq per RMB RMB32,000 per sq m in Q3/2015. supportive measures and monetary 5 25,000 loosening introduced by central and 4 20,000 The gap in first-hand commodity

million sq m local governments over the last year.

3 15,000 residential transaction prices 2 10,000

1 5,000 between those properties within Unsold first-hand residential 0 0 the Inner Ring Road and between inventory, including both commodity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 the Inner & Middle Ring Road, have 2007 2008 2009 2010 2011 2012 2013 2014 2015 and economical housing, fell to 11.9 narrowed since late 2012 (from Source: Shanghai Real Estate Transaction Centre, Savills Research million sq m at the end of August 2Core districts: Changqing, Jing'an, Xuhui and Huangpu. RMB22,500 per sq m in Q4/2012 to Non-core districts: Hongkou, Putuo, , Yangpu, Minhang and Pudong (including Nanhui) 2015, though this rebounded to 12.5 Fringe: Baoshan, Fengxian, Chongming, Jinshan, Qingpu and Songjiang. RMB10,100 per sq m in Q3/2015). million sq m (85,200 units) by the Properties located between the GRAPH 7 end of September due to a surge First-hand high-end apartment market Inner and Middle Ring Road have in new supply. The digestion period supply3, Q1/2005–Q3/2015 recorded the strongest growth of consequently was pushed up to 6.4 Primary area Secondary area Emerging area all regions during recent quarters. months from 5.8 months in Q2/2015. 600,000 This is believed to be primarily as

500,000 a result of limited new residential Similar to the first-hand residential supply within the Inner Ring Road market performance, second-hand 400,000 yet continuously strong demand, as residential transaction volumes

300,000 well as the addition of reasonably- sq m recorded a moderate decrease priced properties in the secondary of 6.1% QoQ, but remained high 200,000 residential areas (mostly located compared to recent years. Average

100,000 between Inner & Middle Ring Road). transaction prices continued an upward trend, hitting a new high of 0 Q1/05 Q1/06 Q1/07 Q1/08 Q1/09 Q1/10 Q1/11 Q1/12 Q1/13 Q1/14 Q1/15 Average residential transaction RMB25,500 per sq m, up 12.6% Source: Shanghai Real Estate Transaction Centre, Savills Research prices inside Inner Ring Road were year-to-date (YTD). 3Primary: Well-established luxury residential enclaves within the inner ring road ( (M), Riverside, Xinhua Road, etc). RMB72,800 per sq m in Q3/2015, Secondary: Developing high-end residential enclaves within the middle ring road (Huamu, Dapuqiao, Gubei, etc). TABLE 3 Emerging: Emerging high-end residential enclaves outside the middle ring road (New Jiangwan Town, Sanlin, Waigaoqiao, etc). Top five areas by first-hand apartment transaction prices, Q3/2015 vs Q2/2015 GRAPH 8

First-hand high-end apartment market Average transaction price Bankuai District transactions and prices, Q1/2005– (RMB per sq m) Q3/2015 Huaihai Road (M) Huangpu 130,200 Primary area transaction volume (LHS) Secondary area transaction volume (LHS) Emerging area transaction volume (LHS) Primary area price index (RHS) Lujiazui Riverside Pudong 123,200 Secondary area price index (RHS) Emerging area price index (RHS) 450,000 350 Q3/2015 Xuhui 99,400 400,000 300 Road (W) Jing'an 95,200 350,000 250 300,000 Huangpu Riverside Huangpu 86,400

250,000 200 Lujiazui Riverside Pudong 143,300 sq m 200,000 150 150,000 Huaihai Road (M) Huangpu 123,200 100 100,000 Q2/2015 Xinhua Road Changning 115,400 50 50,000 (W) Jing'an 98,100 0 0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Hengshan Road Xuhui 91,400 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Shanghai Real Estate Transaction Centre, Savills Research Source: Shanghai Real Estate Transaction Centre, Savills Research

04

TABLE 5 Second-hand residential market by property type, FY2014 Briefing | Shanghai residential sales November 2015

Some of the strongest growth in market, developers accelerated the GRAPH 9 pricing was in the Zhabei district, as launch of new products in order to Residential land transaction area a result of a couple of high profile capitalise upon the buoyant market (buildable area) and AV, Q1/2007– project launches and the recent conditions. This led to an increase in Q3/2015 announcement that the Zhabei supply, with volumes reaching 1,700 district would merge with the Jing’an units, up 135.6% QoQ. Land transaction GFA (LHS) Accommodation value (RHS) district. Sellers were so emboldened 4.5 27,000 4.0 24,000 by the recent market sentiment that There was only one brand new 3.5 21,000 some increased their asking prices, high-end apartment project, The E18 3.0 18,000 RMB per sq m sq RMB per

even though they had entered into by Wharf Holdings, launched in the 2.5 15,000 agreements with buyers and had to third quarter, adding 145 new units 2.0 12,000 million sq m pay compensation, potentially up to onto the sales market. The remaining 1.5 9,000 10% of the value of the property. units were new batches of existing 1.0 6,000 projects. 0.5 3,000 High-end residential 0.0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 sales market Postponed from Q2/2015, Bund 2007 2008 2009 2010 2011 2012 2013 2014 2015 With satisfactory sales performances House launched Tower 7 in October, and a positive outlook for the future the third phase of the projects, Source: Shanghai Real Estate Transaction Center; Savills Research

TABLE 4 Top three areas by first-hand apartment transaction price growth, 2015YTD vs 2014

Transaction price (RMB psm) Transaction price Rank Area District Growth Leading project 2014 Q1-Q3/2015 (RMB psm), 2015YTD

1 Daning Zhabei 39,600 66,600 +68.0 Jinmao Palace 72,300

2 Hongqiao Changning 46,900 64,700 +38.1 Baohua Jakaranda Garden 68,800

Suhe Creek 98,500 3 Bu Ye Cheng Zhabei 51,600 69,800 +35.3 Precious Residence 67,400

Source: Shanghai Real Estate Transaction Center; Savills Research

TABLE 5 High-end apartment supply, Q3/2015

Transaction Launch GFA Total no. Average unit No. of Project Area Developer District price (RMB per date (sq m) of units size (sq m) units sold sq m) Grand Summit, 2nd batch Sep Primary K.Wah Jing’an 90,000-110,000 33,100 117 280 1 嘉天汇, 第二批 Source: Shanghai Municipal Bureau of Planning and Land Resources; Savills The E18 Sep Primary Wharf Pudong 70,000-77,000Research 34,900 145 240 24 滨江壹十八

Dynasty on , 3rd batch 75,000 Sep Primary New World Huangpu 10,500 32 330 -* 盛世滨江, 第三批 (asking price)

Citic Monarch, 2nd batch Jul Secondary Citic Xuhui 70,000-80,000 30,500 136 225 86 中信君廷, 第二批

Jinmao Palace, 2nd batch China Jul, Sep Secondary Zhabei 72,000-78,000 48,500 370 130 256 大宁金茂府, 第二批 Jinmao

Emerald Riverside, 3rd batch Jul, Sep Secondary Vanke Pudong 75,000-100,000 88,100 440 200 88 万科翡翠滨江, 第三批

Star River Pudong, 5th batch Jul Secondary Star River Pudong 70,000-80,000 34,100 199 170 7 星河湾荟苑, 第五批

One Park, 3rd batch 100,000 Aug Secondary Fulai Int’l Minhang 32,600 98 330 -* 古北壹号, 第三批 (asking price)

Yanlord Sunland Garden, 9th batch Jul Emerging Yanlord Pudong 40,000-50,000 31,100 125 250 48 仁恒森兰雅苑, 第九批

The Springs Residences, 5th batch Tishman Sep Emerging Yangpu 45,000 667 3 220 1 尚浦公寓, 第五批 Speyer Source: Shanghai Real Estate Transaction Centre, Savills Research *No transactions registered in the SRETC system as of Q3/2015.

05 Briefing |Shanghai residential sales November 2015

bringing 115 units (34,300 sq m) to a new high-end apartment complex fully-fitted units expected to be the market. Asking prices for the developed by Wharf Holdings. The handed over in 2017. main unit types (three- to five- project enjoys easy access to the bedroom units) range from RMB100- Tangqiao Metro Station () and is Residential land market 130,000 per sq m, with fully-fitted close to the Lujiazui Riverside area. Ten residential (including pure units expected to be handed over in residential and mixed-use) land 2016. Covering a site area of 54,400 sq plots were transacted in Q3/2015, m, the pure commodity residential totalling 1.3 million sq m of buildable New high-end apartment transaction land (Plot E18 (9-3)) was acquired area, up 20.7% QoQ. AVs averaged volumes fell 15.5% QoQ from a in early 2010 for RMB4.8 billion at RMB21,300 per sq m, down from historical high of 335,400 sq m. an accommodation value (AV) of a high of RMB24,800 per sq m in Average transaction prices increased RMB35,500 per sq m – the most Q2/2015. 0.8% QoQ on an index basis to an expensive residential land plot average of RMB71,700 per sq m in by AV in Shanghai this year. The As a result of the strictly controlled the third quarter. project, which started construction supply of land and the bullish in 2013, will be developed into nine sentiment in the residential sales Table 4 shows the three areas 17- to 18-storey apartment buildings market, Q3/2015 continued to see which saw the biggest apartment totalling 472 units, with unit sizes fierce competition for new land plots transaction price increases in ranging from 230 sq m to 410 sq m. among developers, pushing up comparing the first three quarters of premiums to 71.0% from an average 2015 to the FY2014. In September 2015, the project of 58.8% in Q2/2015. launched its first batch of 145 Project focus units, adding 34,900 sq m to the Financial Street Holdings won a The E18 (滨江壹十八) sales market. The main offerings mixed-use land parcel north of were three-bedroom (236 sq m) Shanghai Train Station in the Zhabei and four-bedroom (257 sq m) units. district for RMB8.8 billion on 15 Current asking prices averaged July 2015, beating competitors RMB75,000 per sq m and by the end such as CR Land and a consortium of Q3/2015, 20 units had been sold, consisting of Longfor Properties and with transaction prices averaging Gezhouba Real Estate. This deal RMB74,400 per sq m. marked a new lump sum record for Shanghai in 2015. The 77,300 sq m Located along the in The project is scheduled to be site will eventually have a total above Pudong’s Tangqiao area, The E18 is completed by the end of 2016, with ground GFA of 393,300 sq m, with

TABLE 6 Top residential land deals by AV, Q3/2015 vs Q2/2015

Transacted Transacted Site area GFA Premium AV (RMB Date District Plot ratio price price (RMB (sq m) (sq m) (%) per sq m) (RMB million) million)

Aug Yangpu 15,277 35,137 2.3 1,084 1,730 59.6 49,236

Q3/2015 Sep Baoshan 60,250 120,500 2.0 1,808 3,465 91.7 28,755

Jul Zhabei 77,274 393,323 5.1 5,872 8,815 50.1 22,412

Quarter - - 567,847 1,253,493 2.2 16,100 26,670 71.0 21,276

Jun Zhabei 87,197 231,073 2.7 6,932 8,795 26.9 38,062

Q2/2015 Jun Yangpu 32,360 97,079 3.0 2,364 3,454 46.1 35,579

Jun Hongkou 8,916 20,508 2.3 410 652 59.0 31,793

Quarter - - 537,090 1,038,697 1.9 17,484 25,784 58.8 24,823

Source: Shanghai Municipal Bureau of Planning and Land Resources, Savills Research

06 Briefing |Shanghai residential sales November 2015

office (70%), residential (20%) and the market and enforce policies to taking actions to create a healthier retail (10%) usages. control the property market from property market by increasing overheating. the percentage of small- to mid- Another notable deal was the sized units, which has been clearly acquisition by the Yango Group of Oceanwide International Residences evidenced by the postponement a pure residential land plot in the (泛海国际住区) by Oceanwide of several residential land auctions on 12 August 2015, Holdings, is a new high-end while changes to the planning are for RMB1.73 billion. The site has an residential community on Dongjiadu applied. area of 15,300 sq m and a plot ratio Plot 10 along the Huangpu Riverside. of 2.3, giving it an AV of RMB49,200 The project is expected to launch The policy introduced on 8 October per sq m. This acquisition comes its first batch in October 2015, 2015, which allows HPF to be used shortly after the same company with asking prices in excess of in different cities from the city where acquired another plot in the Yangpu RMB100,000 per sq m. Competing contributions are made, is expected district for RMB41,100 per sq m. projects in the area on the first-hand to encourage employees working in market include Bund House (which first-tier cities to purchase properties Residential sales just launched its ‘’ in in second- or lower-tier cites, market outlook October 2015) and The Bound of which will tend to be priced more The central government’s steps Bund. affordably.  to support the domestic economy and China’s property market are Lower financing costs, a strong sales likely to continue to boost sales in market and limited land supply will the fourth quarter, the traditional continue to intensify competition sales season. Nevertheless, the in the Shanghai land sales market, Shanghai government has repeatedly resulting in higher land prices and, emphasised the fact that Shanghai in turn, higher housing prices. At the will continue to closely monitor same time, the local government is

Please contact us for further information Savills Research Savills Residential Sales

James Macdonald Siu Wing Chu Shirley Tang Michelle Zhou Director, China Deputy Managing Director Director Associate Director +8621 6391 6688 +8621 6391 6688 +8621 6391 6688 +8621 6391 6688 [email protected] [email protected] [email protected] [email protected]

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 600 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 07