Looking Beyond COVID-19: The Shanghai Residential Market

As we near a halfway point in 2020, the Shanghai residential property market has already implemented three major policy actions. These include:

• A deferred payment of the housing provident fund
• A lowering of the loan prime rate (LPR)
• Shanghai's 'Measures for Expanding Effective Investment and Stabilising Economic Development'

While these measures will not jolt Shanghai's residential market into significant price increases, they will be effective in stabilising the market by encouraging rational price growth for the foreseeable future.

According to China Real Estate Index System (CREIS), 38 residential-use land plots were sold in Shanghai from January to April 2020. Total land area sold during the period registered 2.27 million square meters (sq m) and total planned construction floor area amounted to 4.77 million sq m. The average transaction price for the period was RMB 13,663 per sq m.

Shanghai land market - Residential-use land sales (2011 - April 2020)

A Focus on the Second-hand Mass Residential Apartment Market

A sub-market to worthy of attention is the second-hand mass residential apartment market. Property transaction volume in this sub-market continually registered year-over-year (YoY) declines for the first four months of 2020. However, there are signs of market recovery as transaction volume measured on a month-over-month (M-O-M) basis has shown improvement since March.

Shanghai second-hand mass residential apartment market - Total Transaction volume and average price (2011 - April 2020)

In terms of the average transaction price, Shanghai's second-hand mass residential apartment market has remained steady this year with a slight increase in the average property price seen in February.

Breaking down April data by Shanghai's 17 districts/areas indicates that nearly all localities in the city experienced a M-O-M increase in transaction volume.

Shanghai second-hand mass residential apartment market - Total transaction volume by district/areas (April 2020)

April data for district/area average prices show that nine districts/areas witnessed stable or increased M-O-M growth. What's more, four districts/areas-Qingpu, Fringe Jing'an, Yangpu, and Fengxian-experienced Y-o-Y average property price increases for the month of April.

Shanghai second-hand mass residential apartment market - Average price by district/areas (April 2020)

In short, the COVID-19 outbreak has impacted residential market transaction volume and pricing in the first two months of the year. However, the residential market has begun to pick up. Transaction volume and pricing began to recover in March and April as the spread of the epidemic was controlled, policy measures worked their way into the market, and buyer activity started to increase.

What's next?

Looking to the future and as a direct or indirect result of COVID-19, we are likely to see several changes occur in the Shanghai residential property market, including:

• Increased use of virtual property tour technology

• The redesign of residential apartment interior spaces as companies shifted to a work from home model

• Increased installation and usage of smart package drop boxes in residential communities

The growth in the number of smart package drop boxes in China (2014 - 2020)

• Increased volume of older residential properties being revamped to benefit the well-being of residents

Overall, when looking at the residential property market in Shanghai, we expect residential policy to still consider the notion that 'housing is for living, not for speculation.' As such, we may see future policies continue to promote sustainable residential property market development, whether new or regenerated housing, to elevate the well-being of residents in Shanghai.