A correction, following nearly two years of growth, was a warning to wealthy local investors who believed that homes worth at least 30 million yuan (US$4.2 million) would always be good buys.
“The luxury housing segment, particularly lived-in homes, should have run out of steam because some buyers are no longer convinced of their investment value,” said You Liangzhou, owner of Shanghai property agency Baonuo. “Wealthy investors mainly look at newly built units in the city’s prime locations while shunning those pre-owned homes.”
On the mainland, luxury homes are generally high-end flats and villas valued at no less than 30 million yuan each. Brokers said some expensive homes could not attract buyers even after owners reduced prices by more than 30 per cent.
The property sector, along with related industries such as home appliances and construction materials, contributes about a quarter of China’s economic output.
In spite of a troubled property market across the country, the luxury sector in Shanghai has managed to defy the downtrend because wealthy buyers, relatively unscathed by the slump, have had the financial power to pursue homes in prime locations.