Amid robust housing market, feet have slipped off the real estate ladder


Residential buildings in Shanghai.

After years of saving money and with the help of her parents, Julia Zhou finally managed to accumulate 3 million yuan (US $ 461,600) in her bank account. She figured that would be enough to put down a down payment on a decent, mid-size new apartment on the outskirts of Shanghai.

But when her search for a home began, her heart sank and her foot slipped off the property ladder.

“Frankly, I didn’t expect it to be so hard to find a two or three bedroom apartment that I liked and could afford,” said Zhou, who is in his thirties and works as a as a marketing manager for a global company. Fortune 500 Company. “The more housing projects I visited, the more I realized that maybe I should settle for something I didn’t really want or give up on my plan to buy a house altogether.

It wasn’t that there weren’t apartments that she liked and houses that she could afford. On the contrary, Zhou was blocked by a new rating system introduced in Shanghai in February. He created a system of “lottery”, triggered when too many potential buyers look for too few units in new subdivisions. A point system is used to determine who participates in the raffle, which in turn determines the order in which the rights are purchased.

The mechanism is activated when the interest ratio is 130 buyers or more for 100 units available.

The points system favors people looking for accommodation who have a permanent Shanghai residence permit, who are married, who currently do not own accommodation, and who have not purchased a house in Shanghai within the past five years. last years. This earns them 60 points.

Additional points are awarded for more factors, including the number of years a potential buyer has worked in Shanghai since January 2003, as verified by Social Security payment records.

Zhou, who has lived in Shanghai for over 10 years and is single, managed to rack up 62 points, but even that was not good enough to get her into the most popular subdivisions in the outlying areas.

At the end of March, for example, a project developed by Seazen Holdings Co in the suburb of Minhang district, located about 25 kilometers from downtown Shanghai, attracted 1,145 interested buyers, including Zhou, who was arguing the rights to purchase 328 fully decorated apartments.

The units had an average price of about 40,000 yuan (US $ 6,204) per square meter. The oversubscription rate was approximately 2.5 times.

Under the new scoring system, 441 interested buyers with a minimum of 66.2 points were ultimately declared qualified to participate in the draw. This left Zhou and many others in the cold.

Around the same time, another residential project near Sijing Subway Station in the Songjiang Outlying District had 282 potential buyers competing for 128 new apartments sold at an average price of over 46,000 yuan per meter. square. This resulted in an oversubscription rate of 1.2 times, with 68 points declared as the minimum score for entry.

As of mid-May, the points system was triggered in around 12 projects in Shanghai. A housing estate in Jinqiao, Pudong New Area recorded the highest bar with 75.6 points, while one in Jiading District was the lowest with 40.9 points.

Why has buying a house in Shanghai become so complicated? One of the reasons is the sustainable demand regardless of the price.

“Strong sentiment from first-time buyers and home renovators continued in the first quarter of 2021, with new home sales up 6.4% quarter-over-quarter for s’ establish at 3.2 million square meters, the highest quarterly figure since the last three months of 2016, ”said Sherril Sheng, research director, JLL China residential sector.

Indeed, the Shanghai new home market closed 2020 on a high level, with sales of new residential properties, excluding government-funded affordable housing, reaching 1.22 million square meters in December.

This strength extended into January, when transaction volume hit a 53-month high of over 1.43 million square meters, according to Shanghai Centaline Real Estate Consultancy Co.

The market slowed temporarily in February due to the Spring Festival holiday, but buying momentum rebounded quickly in March, when new home sales topped 1.1 million square meters. A correction in April cooled the monthly figures to 767,000 square meters.

“We expect the new residential market to maintain healthy sales momentum throughout this year,” said Sheng. “Further tightening measures launched during the quarter should help dampen speculation and stabilize market expectations.”

In addition to the points system, Shanghai this year also announced other policies aimed at curbing the overheating housing market. They include tighter restrictions on divorced home buyers and a capital gains tax on sales of properties sold within five years of purchase.

Policies are also tightening the management of personal home loans and stepping up the crackdown on the illegal flow of consumer and business loans into real estate.

With the new home market so difficult to break through, it’s no surprise that home buying fever is now spreading to the existing home market, where sales topped 95,000 units in the first quarter, according to global real estate consultancy Savills. This figure was quite staggering compared to the city’s standard of around 20,000 existing units changing hands each month.

During the January-March period, sales of existing homes totaled 7.78 million square meters, up 263% from the previous year, according to a Savills study.

“The surge was mainly caused by fears that house prices would no longer move north,” said Lu Wenxi, researcher at Shanghai Centaline. “Without a fundamental shift in the demand side and mortgage lending policies remaining tight, the market is expected to return to more normal levels as the supply of housing increases and housing seekers are less inclined to close a deal. “

Philip Yao, who turns 40 next month and currently lives with his wife and young son in a rented apartment at Tangqiao in Pudong, said he wants to buy a house for his family but will wait a bit and hope that the market will cool.

“My agent called me the other day to tell me that the owner of a house we were interested in had recently lowered his asking price a little and that there might be room for price negotiation,” he said. said Yao, who was looking for a two-bedroom apartment. built after 2000 and within walking distance of a line 6 metro station for six months.

“Fortunately,” he added, “I don’t have a tight deadline. But I want to buy a house ASAP because I’m sitting on multi-million yuan in cash for a down payment, which is vulnerable. to inflation. “

Sales of existing homes in April fell 39% from March to around 24,000 units, according to the latest monthly report from real estate agency Shanghai Homelink.

“Despite a significant pullback, this remains a fairly strong performance and means there is limited room for price negotiation,” said Lu of Centaline. “I find more owners are willing to negotiate prices if sales fall below the 18,000 unit level for several consecutive months. I guess that could be seen as a rather moderate momentum.”

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