Market sentiment of the residential market in Shanghai improved in Q4 following the new interest rate cut and newly relaxed mortgage terms. The government also reduced the personal housing provident fund loan interest rate from 4.5% to 4.25% for a term longer than 5 years, and from 4% to 3.75% for terms less than 5 years.
In Q4 2014, the total transaction amount of the residential market was around RMB 113,686 million, up 92% q-o-q and transaction volume rose to 3.44 million square metre, up 67.3% q-o-q. Average home price remains stable at RMB 16,306 per square metre, which rose slightly at 5.48% q-o-q.
Looking forward, the residential market in Shanghai is expected to regain its momentum under the government’s stimulus. However, pressure for Shanghai developers to ease the mounting inventory (especially for high-end residential properties) is still high.
For office market, the total transaction amount rose by 55% q-o-q to RMB 10,695 million and the net absorption in Q4 2014 was the highest throughout the year. The average price remains stable at RMB 25,606 per square metre, up 0.2% q-o-q and average monthly rent increased by 0.9% q-o-q to RMB 260 per square metre. Despite surging net absorption vacancy rate for Grade A office, it has still increased by 0.6 percentage points q-o-q to 7.4% due to the opening of new office buildings in Lujiazui (including Lujiazui Century Financial Plaza Tower 3).
In December 2014, the State Council approved plans to set up three more free-trade zones in Shanghai including Lujiazui, Jinqiao and Zhangjiang, therefore demand for high-quality office is expected to rise. The decentralisation trend is likely to continue, as new supply in the core district is limited. Rental growth between Pudong and Puxi may also show diversified trends.
The average price of retail property rose by 6% q-o-q to RMB 19,008 per square metre, while the average daily rent of first floor retail space in prime areas remained unchanged at RMB 46 per square metre. Net absorption hit its year-high in December involving a total transaction volume of over 250,000 square metres. Vacancy rate has increased 1.2 percentage points q-o-q to 5.4% due to new supply in Pudong and vigorous competition from online retail business.
In terms of new retail space supply in 2015, Shanghai Disney shopping mall will attract attention from retailers. The mall is expected to be completed in autumn 2015, providing 50,000 square metres of retail areas complementing the Disney resort opening in December 2015. The Disney Resort along with the expansion of free trade zone will bring new energy to the retail market in Shanghai.