Despite a slowing market, luxury home prices in Shanghai are likely to remain stable or grow in the second half of this year mainly due to the scarcity of land downtown, industry experts predicted yesterday.

"High-end and luxury residential supply in traditional locations has been shrinking at an average rate of 21 percent a year from a peak in 2004, and it will continue to fall in 2008," said David Chen, senior director for residential project marketing at CB Richard Ellis China. "The relatively higher prices of projects mainly in Gubei, Xintiandi and Lujiazui will underpin further growth of high-end apartment prices in the city."

According to CBRE research, the impact of macroeconomic measures on prices of luxury homes since 2006 has been limited, supported by scarcity of land.

The company's latest statistics show that between January and June, the average price of high-end apartments and villas in Shanghai jumped by 28.8 percent and 26.7 percent, respectively, from the same time a year earlier.

CBRE predicted that the average price of luxury apartments in Shanghai will record positive growth in the second half, while villa prices will rise by 6 to 8 percent on average in the same period.

Charles Zhang, associate director for investment services and special projects at Colliers International Property Consultants (Shanghai) Co Ltd, was also positive about the sector.

"We expect prices to stay steady in the coming six months and, for the whole year, their average capital value will likely grow by 6 to 7 percent,'' Zhang said.

Colliers research found that capital value of luxury homes in Shanghai rose to 38,215 yuan (US$5,620) per square meter by June, an increase of 6.7 percent compared with the end of 2007.

As for the city's overall housing market, CBRE's Chen said he expected it to fluctuate for some time as it was already plagued by decreasing sales while buyers wait and see what happens.

"The local market will likely enter a 12-to-18-months-long correction period which will begin with some price adjustments, mainly because of improving conditions of supply in the second half."

(Shanghai Daily July 9, 2008)