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Chinese Developers to Hike Luxury Project Prices

  • Reuters

FILE - Chinese construction workers labor at a highrise building under construction in Beijing.

FILE - Chinese construction workers labor at a highrise building under construction in Beijing.

Some Chinese developers are planning to raise prices for new luxury projects in prime areas this year, in a rare sign of improving sentiment in a market that saw new home prices fall for the last eight months of 2014.

Luxury property sales took a hit last year as China's anti-corruption campaign discouraged conspicuous consumption, but buyers are now taking advantage of easier credit and a stock market rally to upgrade their homes.

Some developers are starting to raise prices in major cities, following the central bank's surprise November rate cut and its decision this month to lower the amounts lenders must hold as reserves as Beijing tries to revitalize an economy growing at its slowest rate in more than two decades.

The high-end trend is unlikely to spill over into the broader market just yet, however, due to a glut of unsold homes.

“It's not going to lead to a full recovery in the market,” said Clement Luk, Shanghai-based chief executive officer for eastern China at property agency Centaline. “Liquidity is more loose compared with a year ago, but the market doesn't have the environment for a big price hike because there's still a lot of inventory and there's no apparent improvement in the macro economy.”

China Resources Land, Franshion Properties and China Merchants Property are all planning to hike prices for some of their new projects in prime areas this year, according to company officials who asked not to be named as they were not authorized to speak to the media.

Home upgrading

“The luxury market is improving from earlier last year as some investors have taken profit from the bullish stock market and are investing in real estate,” said Angeline Wu, vice manager of SRE Finance Center, a real estate company based in Shanghai. “Market liquidity has also got better. But the luxury apartment transactions we're talking about now are not the extravagant ones; they're the home-upgrading types priced at around 50,000 to 100,000 yuan per square meter.”

Chen Long, customer manager at Rapido Real Estate in Shanghai, told Reuters that prices of luxury units it sells in the commercial capital had risen steadily over the past two years and were now fetching about 50,000 yuan ($8,000) per sq m.

China's new home prices may have bottomed and even started to rebound in January after eight months of decline, industry surveys showed, fueling hopes that official data due on Tuesday will confirm a recovery in the massive property market.

The volume of sales of luxury apartments in Shanghai worth more than 10 million yuan ($1.6 million) fell 34 percent last year to 2,246 units, from 3,406 units in 2013, according to real estate research company CRIC. Some 2,243 luxury units were sold in 2012.

“The percentage of luxury new projects launched will be higher in the first-tier cities going forward,” said CRIC analyst Yang Kewei. “Otherwise developers wouldn't be able to survive because land prices in these cities are too high.”

China Vanke, China's largest residential developer, raised prices of the last batch of apartments at a Shanghai project by 5.8 percent this year to 71,720 yuan per sq m, CRIC's data showed. A sales agent at the Vanke project confirmed to Reuters that the company had raised prices but she did not provide details.

“We are not the only project lifting prices,” she said.