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Demand in Shanghai residential market emerges

KUALA LUMPUR: Demand in the Shanghai residential market has gradually re-emerged as developers slashed house prices since the end of last year.

“The overall market saw a decrease in prices but there is an increase in sales volume in March,” said Colliers International's East China division, director of research and advisory Hingyin Lee when presenting Colliers' March 2009 Shanghai Research Bulletin.

In February, sales surged 136.5% year-on-year and 52.2% month-on-month, as the average home price experienced a drop by 13.2% month-on-month to 12,314 renminbi (RM6,569) per sq m.

Although the number of visitors to the Shanghai Spring Real Estate trade fair held from March 10 to 12 hit new highs, the wait-and-see attitude was still overwhelming, said Lee.

The Shanghai municipal government has also issued a notice in March in relation to the progress of the redevelopment of old districts’ where district and county-level governments are encouraged to purchase low-to-mid end commodity residential properties to resettle residents who are affected by re-development.

 “We believe the government’s acquisition for the low-to-mid class housing will help drive demand in the market,” said Lee.

As for the land market, it has been quiet overall with several prominent developers seen taking part in land auctions.

Three residential plots first listed for auction sale in 2009 located in the sub-urban districts such as Jiading and Fengxian were sold at the initial bidding price, with the largest piece measuring 149,813 sq m located at Xuhang town, Jiading district acquired by the Shanghai Jiading Real Estate Development Company Ltd (Shanghai Jiading).

Lee said the land plots acquired by the local government-owned enterprises suggested that they believe the market is near to touching the bottom.

The Grade A office market in Shanghai also saw the first major en-bloc transaction in 1Q2009 after a lacklustre period.

Transacted on March 19, the POS Plaza located at Pudong district was acquired by the Lujiazui Group from the South Korea-based POSCO Engineering & Construction Co Ltd for 1.76 billion renminbi.

“This deal implies an initial yield of 8.9% and suggests that domestic investors with strong balance sheet will become the market players,” Lee added.

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