SHANGHAI'S villa market has suffered significant contraction over the past four months, with transaction volume shrinking by more than 40 percent from a year earlier.
However, luxury villas remained in high demand due to their scarcity and high quality, industry sources said.
Between January and April, a total of 1,417 units, or 377,400 square meters, of villas, including stand-alone villas and attached houses (dubbed "economy villas") " were sold in Shanghai, a year-on-year decrease of 44.1 percent, according to the latest research conducted by Shanghai Youwin Real Estate Information Service Co Ltd, which tracks property data all across the city.
"The decrease, even 2.83 percentage points sharper than that of new apartments, indicated that the tougher macro-control policies aimed at cooling down the domestic real estate market have also affected the high-end residential market," said Xue Jianxiong, head of research at Youwin.
"Even cash-affluent home buyers are choosing to wait. The sales frenzy we saw last year could hardly be repeated this year.''
However, market performance for high-end villas was stunning.
During the four-month period, villas with an average price of more than 25,000 yuan (US$3,577.2) per square meter secured a combined transaction of 312 units, or 107,500 square meters ¨? a year-on-year jump of 149.66 percent.
About 197,700 square meters of economy villas were sold at an average price of 15,258 yuan per square meter in the first four months of this year ¨? a year-on-year decline of 48.07 percent and increase of 50.71 percent respectively.
Approximately 178,400 square meters of stand-alone villas were purchased at an average price of 28,950 yuan per square meter, down 39.37 percent and up 65.11 percent, respectively, from a year earlier.
Industry experts agreed that the average price of luxury villas will probably continue to grow this year.
From June 1, 2006, the Ministry of Land and Resources halted the release of land plots for stand-alone villa developments all across the country, and therefore cut the supply of luxury villas significantly.
Land control will also be tighter for projects such as attached houses and townhouses, due to a central government policy aimed at building more affordable housing.
"Price for high-end villas will likely climb further as saleable space is continuing to drop," Xue said.
A report by global real estate service provider CB Richard Ellis predicted earlier that the average luxury villa price will likely grow by 8.5 percent this year in Shanghai. It said new supply will mainly come from Maqiao in Minghang District; Dongjiao, mainly located in Nanhui; and Dianshanhu in Qingpu District.
The average price of villa developments in Shanghai reached 21,757 yuan per square meter in the first fourth months, surging 62.92 percent from same period in 2007.