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Serviced apartments sell well

SOME overseas real estate investors have been trying to offload their serviced apartment assets in the city through strata-title sales over the past few months as leasing demand from expatriates remains sluggish while buying sentiment for luxury homes is strong.

Morgan Stanley completed sales of 59 units at Chateau Pinnacle Tower A, a development on Xingfu Road in Changning District, in about three months while Chelsea Residence on Huashan Road, owned by HKR International Ltd, also sold 110 units recently, according to real estate services provider Jones Lang LaSalle.

"We've recently noticed a trend that some overseas investors are seeking exit through strata-title sales," said Michael Klibaner, head of research at Jones Lang LaSalle Shanghai. "With leasing demand from expatriates remaining soft and vacancies continuing to increase, some investors have turned away from whole building acquisitions of serviced apartment properties."

Rents in the city's luxury residential market declined 2.6 percent in the second quarter, the fourth consecutive quarterly decrease, while landlords look to retain and attract tenants in an increasingly competitive market, Jones Lang LaSalle research found.

The 59 units at Chateau Pinnacle were sold at an average price of between 55,000 yuan (US$8,052) and 60,000 yuan per square meter since they were offered to individual buyers at the end of March. About half of them went to buyers from the Chinese mainland mostly for their own use instead of for investment, Klibaner said.

Morgan Stanley acquired the 116-unit Chateau Pinnacle Tower A in 2006 for about 760 million yuan, or 28,000 yuan per square meter, according to earlier media reports.

The 110 units at Chelsea Residence, at an average of 60,000 yuan per square meter, also found buyers quickly. HKR International bought the 118-unit building from developer Kerry Properties Ltd in 2000 for about US$31 million, or a price of more than US$1,400 per square meter.

Strata-title sales is a system for registering ownership of space within a multilevel building, under which a title applies to the space and a proportion of the common property.

Shanghai's luxury residential sales market seemed to bottom out in the first half of this year. More than 4,800 units of new apartments, at more than 25,000 yuan per square meter, were sold during the six months, compared with above 5,500 units for the whole of last year, property services firm CB Richard Ellis said earlier this month.


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