Home prices in city continue relentless climb

New homes located in downtown Shanghai, or those located within the city's Inner Ring, or downtown, were traded at an average price of 87,426 yuan ($12,697) per square meter in 2016, an indication that young generations are drifting further away from their dreams of owning a home in the city center, said industry experts.

In contrast, the average price of homes located between the Inner Ring and the Outer Ring was 44,984 yuan per sq m, while those situated beyond the Outer Ring in the suburban areas traded for 18,127 yuan per sq m.

According to the latest report from Chinese Academy of Social Sciences, average home prices in Shanghai soared 61.28 percent year-on-year in January. The report found that some of the mega cities in China have entered a "super high home price period" as median prices of homes in Beijing hit 57,568 yuan per sq m in January, followed by Shanghai at 52,429 yuan per sq m.

It added that the Chinese residential market started to grow quickly between 2015 and 2016, and the sales volume of the nation's residential properties soared 27.14 percent year-on-year between January and September in 2016, 20.27 percentage points higher than in 2015.

Due to a variety of factors, such as the growth in income levels, Shanghai's growing importance as a global city, an expanding population and urbanization, average home prices in Shanghai have soared from 10,336 yuan per sq m a decade ago to 32,151 yuan per sq m in 2015, said James Macdonald, head of Savills China research.

"The development of Shanghai has brought about many valuable job positions as well as expanded the population. But because there are limited residential properties in the city center, only those wealthy enough can afford them," said Macdonald.

Indeed, in spite of rising home prices, home trading has not mellowed. According to statistics, 20.2 million sq m of new homes were sold across the city last year, up 0.5 percent year-on-year. Meanwhile, 35.6 million sq m of second hand homes exchanged hands, 6.5 percent more than the previous year.

Experts believe that the prices in downtown Shanghai are set to grow even higher, especially since Shanghai is planning to upgrade itself into a city that is on par with New York and London.

Chen Sheng, president of the China Real Estate Data Academy, noted that the average home prices in Shanghai is currently around $9,000 per sq m. In contrast, a similar home in New York would cost $16,000 per sq m.

Chen added that Chinese authorities should make provisions to provide more affordable housing for people in the outskirts of the city. He noted that a home in suburban New York can be bought for 40 percent the price of a property in the downtown area.

In Shanghai, however, a home in the suburbs can cost 60 percent the price of one in the downtown area.

wang_ying@chinadaily.com.cn