Housing Prices in Major Cities Drop Nationwide, "Shanghai’s Luxury Home Market in Crisis"

The Chinese real estate market continues to weaken, with housing prices falling across 70 cities nationwide. The luxury home market has undergone even more dramatic changes. (Video screenshot)

October 15, 2024 –The Chinese real estate market continues to slump, with home prices falling in 70 cities across the country. The luxury home market has also experienced a dramatic shift. Some of Shanghai's most expensive properties have seen their prices slashed nearly in half, as property owners lose confidence in the real estate market's long-term outlook.

Home Prices Decline Across 70 Cities

Shanghai's real estate market has long been a focal point nationwide, with its luxury home market especially popular among high-net-worth individuals. However, recent market trends show that even the second-hand luxury home sector is facing unprecedented challenges. Some of the most premium properties are struggling to attract buyers, even after price reductions.

Not only is the second-hand luxury home market struggling, but the supply of high-end new properties is also on the rise. In 2024, over 2,700 units priced at more than 20 million yuan will be listed, doubling the supply from 2023. New policy changes, such as removing the 10% price cap on land premiums for residential land and ending the housing price linkage policy, have caused new home prices to increase, further intensifying competition for second-hand luxury homes.

According to data released by China’s National Bureau of Statistics, in August, home prices increased on a monthly basis in only two cities, Shanghai and Nanjing, with growth rates of 0.6% and 0.3%, respectively. Prices in Xi'an remained flat, while all other 67 cities saw declines.

For second-hand homes, prices increased in only one city (Jilin, with a 0.1% rise) and fell in 69 others, two more than in July.

In first-tier cities, new home prices fell by 0.3% month-over-month, while second-hand home prices dropped by 0.9%, a larger decrease than the previous month’s decline of 0.4 percentage points. Overall, home prices in cities of all sizes saw a month-over-month decline.

In August, 68 cities experienced year-over-year declines in new home prices, and 70 cities saw second-hand home prices drop. Year-over-year, new home prices in first-tier cities decreased by 4.2%, matching July’s decline, while second-hand home prices fell by 9.4%, with the rate of decline increasing by 0.6 percentage points compared to the previous month. Overall, year-over-year declines in home prices have widened across all city tiers.

"Shanghai’s Luxury Home Market Has Collapsed"

Finance influencer Ji Qingkemo, who has 1.55 million followers, recently commented that home prices are still low nationwide, and the market has yet to bottom out.

Official data shows that new home prices in first-tier cities fell by 0.3% month-over-month. In Beijing, Guangzhou, and Shenzhen, prices decreased by 0.5%, 0.5%, and 0.8%, respectively, while Shanghai’s prices increased by 0.6%. Meanwhile, second-hand home prices in Beijing, Shanghai, Guangzhou, and Shenzhen dropped by 1%, 0.6%, 7%, and 1.3%, respectively.

Ji Qingkemo noted that, whether for new or second-hand homes, year-over-year figures are more telling. In first-tier cities, new home prices fell by 3.6%, 10.1%, and 8.2% in Beijing, Guangzhou, and Shenzhen, respectively, while in Shanghai, prices increased by 4.9%. For second-hand homes, prices dropped by 8.5%, 5.8%, 12.5%, and 10.8% in Beijing, Shanghai, Guangzhou, and Shenzhen, respectively.

He pointed out that Shanghai’s second-hand home prices fell by 5.8%, indicating that while new home prices have risen, this has little impact on the average person.

He explained that the increase in new home prices is primarily due to “volume for price,” particularly as Shanghai has been aggressively promoting luxury homes in recent months. This, he said, is a calculated strategy.

By showing that home prices in Shanghai are rising year-over-year, it creates the illusion that prices have bottomed out and are climbing again. This could, in turn, influence perceptions in other cities, like Beijing. If people fall into this line of thinking, the strategy will have succeeded.

While second-hand home transactions have increased significantly, some luxury home prices have seen sharp declines. Certain well-known complexes, even with discounted listings, have struggled to attract buyers, reflecting a profound shift in supply-demand dynamics.

Ji Qingkemo revealed that Shanghai’s luxury home market has recently "exploded"—for example, a 406-square-meter apartment in the prestigious Green City Huangpu Bay complex was listed for 68 million yuan, with a unit price of 167,000 yuan per square meter. The owner’s original asking price was 108 million yuan, but they slashed it by 40 million yuan, not out of financial need but due to long-term pessimism about the market. The apartment reportedly sold within two and a half days.

"The last time this property sold, the price was 120 million yuan. This time it sold for 68 million. Will anyone pay more than this for it in the future? This will likely set a new benchmark for prices in the Green City Huangpu Bay luxury complex," he said.

He added that this shift in the luxury market has little to do with ordinary people. Even though the price dropped by 40 million yuan from 108 million, how many people can afford 68 million yuan? In other core areas of Shanghai, luxury homes in complexes like "Cuihu Tiandi" have seen total price drops of over 30 million yuan with no takers. Luxury homes in Shimao Riverside Garden have seen prices slashed by half compared to their peak. A 214-square-meter luxury apartment in Zhonghai Jianguoli lost over 12 million yuan in value within a year.

He also highlighted that second-hand apartments in these luxury neighborhoods are listed at over 200,000 yuan per square meter, but some luxury homes have dropped to 170,000 yuan per square meter, making them more attractive. This has raised the overall price level in Shanghai. "Now we know that Shanghai’s so-called price increase is entirely due to luxury home transactions. It’s a matter of trading volume for price in the luxury home market."

He concluded that, given the overall economic climate, wealthy people who can afford homes worth hundreds of millions of yuan aren’t lacking property. While some may believe that rising luxury home prices will lift the entire housing market, this is unlikely. The luxury home market and the regular housing market are not operating in the same environment. Therefore, it’s essential to look beyond the surface and understand the underlying realities.

Edited by Gao Jing