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August 14, 2009

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Home » Business » Real Estate

City's home prices seen to rise

HOME prices in Shanghai may continue to rise over the next few months and luxury houses are seen to be highly sought after, despite a correction in volume last month, according to industry analysts.

The central government's relatively loose macro-economic policies, an imbalance between supply and demand as well as an increasing need to park cash in real estate as a hedge against inflation would probably help home prices maintain their climb right to the end of this year, they said.

"A loose policy environment will benefit the real estate industry as developers will find it easy to get loans from the banks while home buyers will be able to enjoy rather low mortgage rates," said Gong Min, a research manager at Shanghai Centaline Property Consultants Ltd, operator of the city's largest real estate brokerage.

There would be insufficient supply of new homes for some time. Most developers slowed their construction last year amid sluggish conditions while many of them also chose to hold back on supply in anticipation of higher sales prices as the market rebounded this year, industry people said.

As of Tuesday, a total of 5.2 million square meters of new homes were available for sale in the city, which could be sold in 2.4 months as about 2.15 million square meters were sold on average monthly between January and July, according to Centaline statistics.

Luxury homes are seen to continue to outperform the mass market as they are viewed as a hedge against inflation, industry people said.

"Wealthy people would always purchase houses with supreme quality and location to fight against inflation," said Fu Qi, a senior analyst with E-House (China) Holdings Ltd. "We believe the strong momentum in the high-end sector to be sustainable."

A total of 219,000 square meters of new luxury homes, priced above 40,000 yuan (US$5,856) per square meter, were sold in Shanghai in the first seven months, a jump of 45 percent from same period a year earlier.

Also, purchases of high-end houses accounted for 3.1 percent and 3.4 percent in the city's overall new home sales in June and July, from only 1.2 percent at the start of this year, according to E-House research.


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