Market Trends of China Luxury Residential Real Estate Industry
Growth of urbanization driving luxury residential real estate market
One of the factors driving demand for the luxury residential real estate market is the rising pace of urbanization, China’s urbanization ratio was around 64% and this ratio to rise over the next five years to 70% or 75%. Between 2000 and 2020, an estimated 415 million new residents settled in China’s cities, and an estimated 208 million will settle by 2040, according to estimates by the United Nations. With improving job market conditions, better income growth, consumers or households are still looking for (an) upgrade or buying primary (residences).
Despite the high price tag, the demand for luxury housing in China is on the rise. Depending on the location, a luxury home can vary in price significantly. Hong Kong has the highest average price per square foot of prime luxury residential property worldwide.
Hong Kong’s market stability was supported by mainland China finally reopening its borders since the pandemic, which welcomed several expats and professionals. In 2022, the special administrative region of China, Hong Kong ranked fourth worldwide in terms of number of sales in super-prime residential assets (USD 10 million or more).
Increase in demand for luxury residential properties in the country due to favorable mortgage rates
The decision of house purchase is also influenced by lending mortgage rates in the luxury residential real estate market. In February 2022, banks in nearly 90 Chinese cities slashed mortgage rates in an effort to boost sales and mood in a residential and luxury residential real estate market roiled by a liquidity crisis and struggling developers.
Commercial lenders decreased mortgage rates after the central bank cut the benchmark LPR twice in December 2021 and January 2022, aimed at boosting the world's second-largest economy's flagging growth.
China's four biggest banks lowered mortgage rates in the southern city of Guangzhou by 20 basis points in February 2022. Mortgage rates in smaller cities such as Hohhot, Zhongshan and Huizhou were cut by 30 basis points. The Shanghai branch of the central bank has told commercial lenders in the financial hub to accelerate real estate-related loans.
In 2022, China's central bank slashed a key mortgage rate for the first time in almost two years, the shares of Chinese property developers soaring in Hong Kong. The stock prices of Hong Kong-listed Chinese property developers increased dramatically, recovering some of the recent losses.
