China’s Luxury Home Sales Slumped 40% Last Year

Sales of luxury homes, costing more than CNY50 million (USD7.3 million) each, tumbled 40% last year in China from the year before on tight supply and as investors look for better returns elsewhere.

Only 383 top-tier luxury properties priced at over CNY50 million sold in 2022, according to Ding Zuyu, chief executive officer of think tank E-House China Enterprise Holdings. The main reason for the slump in sales was lack of supply, especially in Beijing and Shanghai, he added.

Some 422 new upmarket houses costing more than CNY150,000 (USD21,800) per square meter changed hands, a drop of 19%. Most of these transactions were in the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen, while Suzhou, which made the list in 2021, had no such sales last year.

The pre-owned luxury property market fared even worse. Last year, the number of second-hand luxury homes costing more than CNY150,000 per sqm slumped 52% and sales of those priced at above CNY10 million (USD1.5 million) has fallen back to 2017 levels and nearly halved from 2021.

The cooling market also has to do with luxury properties losing their allure as a good investment. High-net-worth individuals used to be passionate about snapping up luxury homes in core cities as asset investments, fuelling a boom that lasted from 2019 to August last year.

But since then, a significant number of investors have left the market, either because they believe the market has peaked, that demand is stretched or perhaps that the need to live in the premium properties is greater than investor demand.

Around 30% of those who sold luxury homes last year were aiming to optimize their asset allocation, while 65% of those who bought intended to live in them, Ding said.

Only 5% of buyers of high-end property were investors last year, according to China Real Estate Information. There were fewer buyers aged between 30 and 40 and more aged 45 and above.

Editors: Shi Yi, Kim Taylor

Source: www.yicaiglobal.com