Shanghai home prices buck trend

Shanghai remains an attractive option for investors and home buyers despite indications that the real estate market is in decline, sources said.

Average prices of both newly-built and used homes continued to rise in the second quarter with new homes hitting 26,600 yuan ($4,285) per square meter, up 3.5 percent quarter-on-quarter. The price of used homes jumped to a new high of 21,000 yuan per sq m, according to UK-based real estate consultancy Savills Plc.

The performance of the country's financial hub is impressive when compared with falls in transactions and prices in the rest of the country during the same period.

In the second quarter, a total of 44.35 million sq m of gross floor area was sold across the nation's 40 major cities, tracked by China Real Estate Information Corp, down 24 percent year-on-year. Half of the 70 cities the National Bureau of Statistics monitored saw prices soften month-on-month in May.

Residential prices are expected to remain flat or record a moderate fall in coming quarters as negative sentiment in the wider China market impacts sentiment in Shanghai. Strong market support should mean that any reduction in prices will be marginal, according to Savills' report.

Ding Zuyu, executive president of E-House (China) Holdings Ltd, believes the downturn will not last long and that the adjustment will stabilize as soon as in the fourth quarter.

Demand is there, whether from first-home buyers or those wishing to trade up to larger flats, but current adjustment is in buyers' favor, said Ding.