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Positive mood propels transactions

CHRIS Lin, a 40-something sales manager for a Dutch paint company, has been spending every weekend the past month driving around the city's suburbs with his wife - from Minhang to Songjiang, from Pudong to Puxi.

These are no mere excursion lovers. Lin and his wife are but two of the thousands of house-hunters contributing to a recent sales boom that exceeded the expectations of even the most veteran real estate professionals.

The couple finally purchased a stand-alone villa in western Qingpu District for 6.2 million yuan (US$907,760), or more than 26,000 yuan per square meter.

"My wife and I both believe we'd better park our cash in real estate as a hedge against inflation," said Lin, who currently lives with his wife and daughter in an older four-bedroom apartment in the downtown Changning District.

Their rationale for buying a home now is typical of the mood that's been propelling the housing marking in recent months. Positive sentiment, driven by increased affordability, has apparently ended a housing slump sooner than analysts predicted.

New home sales in Shanghai, excluding those related to urban redevelopment projects, soared nearly 70 percent to 8.7 million square meters during the first half of this year. That compares with 8.9 million square meters sold in the whole of 2008, according to latest research released by Shanghai Uwin Real Estate Information Services Co.

"The local residential market has been picking up strength since February, and positive sentiment has been driven by individual buyers as well as investors," said Lu Qilin, a researcher at Uwin.

"A release of pent-up demand amid price cuts by real estate developers and favorable loan policies first triggered the market after the Spring Festival," he said.

In June alone, about 2.1 million square meters of new housing were sold across the city, the highest monthly volume since 2008. In February, new home sales totaled 790,000 square meters, rising to 1.5 million square meters in March, 1.9 million square meters in April and 2 million square meters in May, according to Uwin statistics.

Industry analysts say they are particularly heartened by strong sales in the local luxury home market, which is viewed as an indicator of the market strength.

One recent example is Tomson Riviera.

The luxury residential development in Pudong's Lujiazui financial district - which set price records when it was unveiled four years ago - sold 16 apartments in Block C within just two weeks, at an average price of about 95,000 yuan a square meter.

By comparison, only four units in Block A, which boast better riverfront views and larger apartments, were sold during the past four years. The Tomson Group launched the project in 2005 at prices starting at 110,000 yuan a square meter, then the costliest on the Chinese mainland.

Shanghai's property market became overheated from May 2007 with prices soaring and speculation rampant. In some extreme cases, prices even doubled in just a few months.

The government, concerned about the bubble bursting, put the brakes on the market in October 2007 by asking commercial banks to raise the down payment and interest rates for people who hold more than one mortgage, a major blow to crack down on speculators.

Government officials are hoping for a more orderly market as it recovers.

Demand shift

CB Richard Ellis, a global real estate services provider, said more than 4,800 new home units, costing more than 25,000 yuan a square meter, were sold in Shanghai in the first six months of this year, compared with about 5,500 units purchased during the whole of 2008.

"We've noticed a shift on the demand side as Shanghainese, together with people from other provinces, are comprising an increasingly larger proportion of luxury residential buyers," said David Chen, senior director of CB Richard Ellis. "The country's rapid economic growth and comparatively smaller impact from the global financial crisis are major reasons behind such a change."

At present, about 80 percent of luxury home buyers in Shanghai are Chinese mainland residents, compared with about 20 percent two years ago, according to Danny Ma, director of CB Richard Ellis Research China.

The sales fever has also buoyed the existing home market, too.

Between January and June, 138,400 existing units were sold in Shanghai, an increase of 9.3 percent compared with the whole amount sold last year, according to the latest research from Century 21 China Real Estate, operator of the city's second-largest brokerage chain.

Average prices, meanwhile, rose by 20 percent during the six-month period, reflecting a move into higher-end property, Century 21 said.

"The easing of credit and a revival in China's stock market have been fueling the existing home market in the past few months," said Zhang Weiping, general manager with Century 21 China Real Estate's Shanghai operations.

Lin and his wife will be moving into their new villa next year. The couple plan to lease their existing apartment to help with their 20-year, 2.5 million yuan mortgage.

"Living in the suburbs with a garden of our own and escaping from the hustle and bustle of city life has been our dream for a long time," he explained.


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