File photo: VCG
The sale of luxury homes in China's big cities showed a V-shape recovery in the second quarter of 2020 with a 30 percent rebound in sales volume from the same period a year ago. Why are people in favor of bigger and more expensive homes during this particular time?
Luxury homes are those with three bedrooms or more, bigger than 150 square meters and priced above 10 million yuan, or 1.5 million dollars. That's the common definition in the housing market in China's first tier cities.
China defines luxury residences as non-common homes, and charges higher purchase taxes. But that doesn't stop people across the country from buying the units. In the second quarter, Beijing's luxury home sales jumped 55.6 percent from a year ago. Shanghai's sales climbed 63.5 percent while Shenzhen saw an increase of 83.8 percent. All of the readings were the best since 2018, according to housing platform Beike's research institute.
"As the pandemic eases, high-end customers are growing more interested in luxury projects. Our homes are priced above 20 million yuan per unit because of our quality and mountain views. Now we receive three times as many visitors than last year, and sales are up 50 percent," said Huang Xiaohua, Marketing Chief of Huabiao Group.
Industry insiders say the pandemic didn't curb luxury home demand, but actually boosted it. The pent-up demand in the first quarter was released in the second. And moreover, people stayed at home almost all the time during the pandemic. That has made them appreciate more than ever the importance of a cozy, spacey and quality home.
The pandemic also created a favorable home-buying environment because of ample liquidity and lower interest rates.
"2020 has been a special year because of the pandemic. The rather loose monetary policy has allowed real estate developers to borrow more easily, and also allowed home buyers to borrow more easily," said Cai Zehao, Vice President of Huabiao Group
China lowered its key Loan Primary Rate by 20 basis points in April and was expected to reduce rates again in the second half to stimulate economic activities. The cut dropped home buyers' mortgage costs and developers' financing costs.
"Most developers build small homes for quick money because small homes are easy to sell," Cai added, "China's housing industry policy is that 'homes are for living, and not for speculating.' But luxury homes are always limited on the market, because a good natural environment is limited, good locations and good views are limited, and buyers who can afford them are limited. So luxury homes are really for living. ”
insiders say that Chinese home buyers normally spend tens of billions
of dollars for overseas houses. This year, due to travel restrictions
and global pandemic, especially in the U.S. and Europe, this group of
overseas home buyers has returned to the Chinese domestic market and has
become a strong purchasing power for luxury homes.