Luxury Begins at Home for Consumers

Domestic buyers have outnumbered overseas investors as dominant consumers of Shanghai's luxury apartments, figures showed Thursday.

Of the 2,017 units of luxury apartments - those with an average transaction price of more than 30,000 yuan (US$4,400) a square meter - sold in Shanghai between January and June, only 159 units were purchased by overseas investors, statistics from the Shanghai Uwin Real Estate Information Services Co, a leading real estate research company, showed.

That compared to the 194 out of 404 units sold to overseas buyers (including foreigners and those from Taiwan, Hong Kong and Macau) in the same period last year.

Luxury apartments have become a hot sought-after item for domestic home buyers even though the local housing market has been plagued by slackness since the fourth quarter of last year, said Xue Jianxiong, head of research at Uwin. That also helps explain why Shanghai's new commodity housing price soared 41 percent to 14,026 yuan per square meter in the first half of this year.

In the first six months of this year, the transaction volume of new commodity houses plunged nearly 50 percent to 5.259 million square meters in Shanghai. However, transactions of luxury apartment units were almost five times the number of a year earlier.

Among the domestic buyers, the greatest jump was among people from outside Shanghai.

According to the Uwin figures, people from other parts of the country bought 675 units of luxury apartments, or 33 percent of the total, in the first half of this year in Shanghai. Only 29 units, or around 7 percent, were purchased by them a year earlier.

The disposable income of Chinese people will probably further expand between 15 to 20 percent over the coming few years, said Alan Chiang, the head of residential for DTZ China, in a report Thursday.

The reality is that Chinese investors have been facing de facto negative interest rates since 2007. Coupled with rather limited investment channels at the moment, this will continue to make real estate an attractive choice.

The disposable income of city dwellers added 14.4 percent to 8,065 yuan in the first half.