Shanghai Residential Villa: Up despite Cooling Measures

Stephen Chung

Managing Director

Zeppelin Real Estate Analysis Limited

September 2006
(Based on Data from Soufun)

Despite the recent measures to cool the real estate market, the Shanghai residential villa market sub-sector has gained in both prices and transactions, cumulating in a 1.30% increase for the sub-sector index in June 2006 over the last period of April 2006. In fact, some residential villa developers have utilized the recent cooling measures to help promote their projects and purchasers have responded in kind.  

This is in contrast to the overall residential sector, or for that matter, the residential apartment sub-sector, where both transactions and prices have declined, with the former by as much as 30%.   

Villas here refer to generally single family residential properties in townhouse, semi-detached, or detached styles, including estate lots. While many of such properties could be described as being in the luxury category, not all of them are as there could be relatively affordable ones in the suburbs or fringe areas. Conversely, many of the expensive properties could be in the form of high-rise apartments. Here are the recent residential villa index figures: 

Not only the overall trend being on an upward path, the correlation R2 bears some significance too i.e. prices do move up with time although not in an exact 1 to 1 manner. From the chart, it appears that after the initial impact induced by the various cooling measures, the residential villa sub-sector has regained confidence with prices and transactions reportedly regaining their former impetus.  

Price-wise, the average price per floor area (Yuan or RMB / m2) has been hovering in and around the 13,000 range with the June 2006 figure at 15,510 approaching the 16K mark. The figures and chart are as follows: 

Residential Villa Sub-Sector

Average Price Yuan / m2

Jan-06

13,666

Feb-06

11,887

Mar-06

11,462

Apr-06

12,594

May-06

13,354

Jun-06

15,510

We have also compiled data and done some calculations, including correlations, standard deviations, and volatility (risk) assessments where feasible, on the following, largely based on statistics from January°VJune 2006: 

a)      Sold number of units, floor areas, and the typical size (floor area) per unit

b)      Newly supplied number of units, floor areas, and the typical size (floor area) per unit

c)       The more affordable residential villas versus the more expensive villas

d)      The ratios between demand (as evidenced in transaction data) and supply

e)      The patterns of demand and supply and to what extent they synch (or not synch)

f)        The comparison of the residential villa sub-sector to the overall residential sector 

The above content may be obtained via the full version of this study and interested parties may refer to this webpage for details: 

http://www.real-estate-tech.com/creis/index.htm 

In short, investors should monitor the Shanghai residential villa (and the rest of the luxury residential sector) sub-sector closely for reflexive points and opportunities.

Notes: The article and/or content contained herein are for general reference only and are not meant to substitute for proper professional advice and/or due diligence. The author(s) and Zeppelin, including its staff, associates, consultants, executives and the like do not accept any responsibility or liability for losses, damages, claims and the like arising out of the use or reference to the content contained herein.                   

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