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Homeowners in Shanghai, eager to sell their apartments, are providing discounts of up to 10 percent in order to attract a diminishing pool of potential buyers due to a sluggish property market and pessimistic economic forecasts. This surge in home sales within the city's commercial and financial hub, expected to further drive down prices, is indicative of a "death spiral" in mainland China's real estate market, as noted by some experts.
According to data provided by Centaline Property, the number of previously owned apartments available for sale in Shanghai increased from approximately 100,000 in mid-March to around 200,000 by the end of April.
For homeowners in Shanghai, a 10 percent decrease in price could result in a profit reduction of 1.5 million yuan (equivalent to US$208,920). This estimation is based on the fact that a three-bedroom apartment in downtown areas of the city could be priced at 15 million yuan.
With potential buyers adopting a cautious approach and adopting a "wait-and-see" mindset, the volume of property transactions has experienced a rapid decline. According to Centaline, there were 24,000 transactions of previously owned homes in March, followed by 17,700 units in April. The downward trend continued in May, with transactions dropping by a further 13.3 percent to reach 15,300 units.
This slow-paced property market adds to the challenges faced by Shanghai's local economy, which is still grappling with the aftermath of three years of stringent Covid-19 pandemic restrictions.In the first quarter of this year, Shanghai's gross domestic product (GDP) grew by 3 percent, while the overall mainland China's GDP expanded by 4.5 percent.
For the year 2023, Shanghai has set a target for GDP growth at 5.5 percent, which is 0.5 percentage points higher than the national figure for China as a whole.In the first five months of the year, investment in the property sector experienced a decline of 7.2 percent throughout mainland China.
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