In 2022, the price for new residential property in Shanghai's inner ring dropped by more than 4,000 yuan per square meter, to 119,244 thousand yuan per square meter. Although the local authorities introduced policies to stabilize the market, the real estate market in Shanghai’s central districts remained under downward pressure, similar to those experienced by other major cities in China.

The most competitive real estate market in the country

Home prices in Shanghai are among the most expensive globally. The area within the city's inner ring road is certainly one of the most competitive real estate markets in all of China, with property prices nearly three times higher than those outside the outer ring road. Rising prices are far beyond the reach of ordinary residents, and the few who can afford to buy often have to take out substantial mortgages for their homes, resulting in a high proportion of real estate in their personal assets.

Challenges facing China’s real estate sector

The high level of indebtedness of the Chinese people and the bubbles in the country's real estate sector have become one of the major risks to China's economy. While developers expanded through continuous borrowing and the sale of off-plan properties to homebuyers, the market saw a significant excess of housing supply in most regions. There have also been instances in recent years where developers have had difficulties in completing construction projects or in repaying their loans or bonds. Addressing the risks in China's real estate sector, particularly in companies such as the Evergrande Group and Country Garden, has become an urgent task to ensure China's economic stability and prosperity.

In 2021, the average price of residential housing sold in Shanghai, the most important economic hub of China, surpassed 37,400 yuan per square meter, making the city one of the least affordable cities in the country. The housing market boom Since the housing reform in the 1990s, the prices of homes in Shanghai have increased almost every year, thanks to the growth of the city’s population and, thus, the high demands in the housing market. The high property prices gradually became out of reach for most residents, who earn an annual per capita income of only 172,000 yuan. Residential properties in the city center were especially unaffordable, as newly built homes located within Shanghai's inner ring road had an average price of 123,590 yuan in 2021, three times more expensive than their counterparts outside the outer ring road. Risks and interventions The high price not only made living in the city expensive for its residents, but also posed a grave risk to China’s financial system. In the first 20 years of this century, the total value of personal housing mortgage loans in Shanghai increased by more than 20 times, and defaults of any moderate scale can be consequential. Therefore, both the central and the municipal authorities had been attempting to curb the continuous rise of property costs in Shanghai, through the increase in the supply of housing stocks and policies limiting speculations in the market. However, most measures were not as effective as anticipated.

Property Price: YTD Avg: Residential: Existing House: Shanghai data was reported at 24,682.611 RMB/sq m in Dec 2019. This records a decrease from the previous number of 25,359.528 RMB/sq m for Nov 2019. Property Price: YTD Avg: Residential: Existing House: Shanghai data is updated monthly, averaging 11,732.789 RMB/sq m from Jan 2006 (Median) to Dec 2019, with 167 observations. The data reached an all-time high of 27,072.125 RMB/sq m in May 2019 and a record low of 6,193.722 RMB/sq m in Feb 2009. Property Price: YTD Avg: Residential: Existing House: Shanghai data remains active status in CEIC and is reported by National Bureau of Statistics. The data is categorized under China Premium Database’s Price – Table CN.PD: NBS: Property Price: Residential: Monthly.

Property Price: YTD Avg: House in Advance: Shanghai data was reported at 36,584.915 RMB/sq m in Dec 2019. This records an increase from the previous number of 36,511.883 RMB/sq m for Nov 2019. Property Price: YTD Avg: House in Advance: Shanghai data is updated monthly, averaging 17,632.127 RMB/sq m from Jan 2006 (Median) to Dec 2019, with 168 observations. The data reached an all-time high of 41,991.002 RMB/sq m in May 2019 and a record low of 7,113.000 RMB/sq m in Apr 2006. Property Price: YTD Avg: House in Advance: Shanghai data remains active status in CEIC and is reported by National Bureau of Statistics. The data is categorized under China Premium Database’s Price – Table CN.PD: NBS: Property Price: Monthly.

In 2022, the total value of residential housing sold in Shanghai, China surpassed 693 billion yuan, increasing from the previous year. This growth was mainly fueled by the significant price rise in residential housing in the city. In 2017, the government of Shanghai introduced several strict regulations on the housing market, intending to curb speculations. The policies resulted in a sharp decline in the market between 2016 and 2017, while also causing further price increases in the years that followed.

In 2022, the average price for residential real estate in Shenzhen was over 55.700 thousand yuan per square meter. This was the highest price among all major cities in China, with the average price across the country amounting to 17,359 yuan per square meter. A pillar of the Chinese economy China gradually abolished its welfare housing allocation system and liberalized its real estate market in the 1990s. In 2003, the government declared the real estate sector as one of the pillars of the Chinese economy. Thanks to the country's rapid economic development and urbanization, China's real estate market expanded significantly in the last two decades, with the sector accounting for about seven percent of China's GDP in 2022. Unaffordable in major urban centers While the real estate industry greatly contributed to the growth of China's economy, the housing market boom also created social issues and financial risks. In comparison to household income, property prices in major cities, most notably Shanghai, Beijing, Guangzhou, and Shenzhen, are extraordinarily expensive for average citizens. Soaring housing prices have also led to a rapid division of wealth between homeowners and renters. At the same time, debt problems created by the rapid expansion of real estate companies and the high levels of debt accumulated by Chinese citizens have created serious potential hazards for China's financial system.

Despite a slowdown in the country's economy, property prices remained relatively high across China in 2023. In Shanghai, the average prices for residential housing exceeded RMB 40,000 per square meter, making the metropolis one of the most expensive cities to live in globally. Meanwhile, many less developed regions, such as the provinces of Guizhou, Gansu, and Guangxi, had average housing prices below RMB 6,000 per square meter. High property prices in major cities The commodification of real estate in the 1990s led to a rapid rise in property prices across China over the last three decades. Between 1998 and 2023, average property prices in China rose more than four times to more than 10,000 RMB per square meter. The cost of housing in core areas of major urban centers such as Shenzhen, Shanghai, and Beijing can often reach unaffordable levels, even for the middle class. Key drivers behind the housing price rise Due to the regional disparities in the country, China's rapid urbanization resulted in a high influx of internal migrants into its eastern cities, resulting in a short housing supply across many regions. At the same time, due to China's unique land and tax system, local governments are often highly dependent on land transfer revenues for their finances. As a result, many regional authorities tend to restrict the supply of available land in the market, further exacerbating property price rises across the country.

In 2023, the average price of real estate in China was approximately 10,438 yuan per square meter, representing a decrease from the previous year. Rising prices in the real estate market Since the 1998 housing reform, property prices in China have been rising continuously. Housing in the country is now often unaffordable, especially considering the modest per capita income of Chinese households. Shanghai and Beijing even have some of the most competitive real estate markets in the world. The rapid growth in housing prices has increased wealth among homeowners, while it also led to a culture of speculation among buyers and real estate developers. Housing was treated as investments, with owners expecting the prices to grow further every year. Risk factors The expectation of a steadily growing real estate market has created a property bubble and a potential debt crisis. As Chinese real estate giants, such as China Evergrande and Country Garden, operate by continuously acquiring land plots and initiating new projects, which often require substantial loans and investments, a slowdown in property demands or a decline in home prices can significantly affect the financial situation of these companies, putting China’s banks in a vulnerable position. In addition, due to a lack of regulations and monetary constraints, the long-term maintenance issues of high-rise apartments are also a concern to the sustainable development of China’s cities.

Shanghai Property Price: Secondary Mkt: Huangpu: Old Urban Area data was reported at 22,457.000 RMB/sq m in Nov 2010. This records an increase from the previous number of 22,371.000 RMB/sq m for Oct 2010. Shanghai Property Price: Secondary Mkt: Huangpu: Old Urban Area data is updated monthly, averaging 15,457.000 RMB/sq m from Jan 2005 (Median) to Nov 2010, with 71 observations. The data reached an all-time high of 22,457.000 RMB/sq m in Nov 2010 and a record low of 9,571.000 RMB/sq m in Jan 2005. Shanghai Property Price: Secondary Mkt: Huangpu: Old Urban Area data remains active status in CEIC and is reported by Shanghai Existing Property Index Office. The data is categorized under China Premium Database’s Price – Table CN.PD: Shanghai Existing Property Index Office: Shanghai Property Price: Secondary Market (Discontinued).

Shanghai Property Price: Secondary Mkt: Pudong New Area: Sanlin data was reported at 14,257.000 RMB/sq m in Jan 2011. This records an increase from the previous number of 14,114.000 RMB/sq m for Dec 2010. Shanghai Property Price: Secondary Mkt: Pudong New Area: Sanlin data is updated monthly, averaging 10,743.000 RMB/sq m from Jan 2005 (Median) to Jan 2011, with 73 observations. The data reached an all-time high of 14,571.000 RMB/sq m in May 2010 and a record low of 6,629.000 RMB/sq m in Jan 2005. Shanghai Property Price: Secondary Mkt: Pudong New Area: Sanlin data remains active status in CEIC and is reported by Shanghai Existing Property Index Office. The data is categorized under China Premium Database’s Price – Table CN.PD: Shanghai Existing Property Index Office: Shanghai Property Price: Secondary Market (Discontinued).

Shanghai Property Price: Secondary Mkt: Yangpu: Zhongyuan data was reported at 12,743.000 RMB/sq m in Jan 2011. This records an increase from the previous number of 12,714.000 RMB/sq m for Dec 2010. Shanghai Property Price: Secondary Mkt: Yangpu: Zhongyuan data is updated monthly, averaging 10,943.000 RMB/sq m from Jan 2005 (Median) to Jan 2011, with 73 observations. The data reached an all-time high of 12,771.000 RMB/sq m in Jun 2010 and a record low of 7,315.000 RMB/sq m in Jul 2006. Shanghai Property Price: Secondary Mkt: Yangpu: Zhongyuan data remains active status in CEIC and is reported by Shanghai Existing Property Index Office. The data is categorized under China Premium Database’s Price – Table CN.PD: Shanghai Existing Property Index Office: Shanghai Property Price: Secondary Market (Discontinued).

In June 2024, 73.61 percent of houses sold in Shanghai were priced under 4 million yuan, with 57.24 percent below 3 million yuan. Demand for "old, dilapidated, and small houses" surged, particularly among single individuals from other regions.

In the first half of 2024, the share of transactions in Shanghai, China, below 5 million yuan saw a slight decline, while those between 5 million and 8 million yuan dominated, accounting for 34.28 percent of all transactions. This trend indicated a rising threshold price range for new home purchases in the city.

Shanghai Property Price: Secondary Mkt: Xuhui: Tianlinkangjian data was reported at 16,914.000 RMB/sq m in Jan 2011. This records an increase from the previous number of 16,800.000 RMB/sq m for Dec 2010. Shanghai Property Price: Secondary Mkt: Xuhui: Tianlinkangjian data is updated monthly, averaging 13,771.000 RMB/sq m from Jan 2005 (Median) to Jan 2011, with 73 observations. The data reached an all-time high of 17,143.000 RMB/sq m in May 2010 and a record low of 9,000.000 RMB/sq m in Jan 2005. Shanghai Property Price: Secondary Mkt: Xuhui: Tianlinkangjian data remains active status in CEIC and is reported by Shanghai Existing Property Index Office. The data is categorized under China Premium Database’s Price – Table CN.PD: Shanghai Existing Property Index Office: Shanghai Property Price: Secondary Market (Discontinued).

In 2022, the total value of personal housing loans in Shanghai exceeded 1.68 trillion yuan, representing an increase from the previous year. With the city’s housing market being incredibly competitive in the past two decades, the total value of mortgage loans in the city has increased by more than 24 times since the turn of the century. A competitive housing market As the economic capital of China, Shanghai has long been attractive to talents throughout the country, resulting in strong growth in its population. Since the housing reform in the 1990s, the price of homes in Shanghai has risen continuously, with housing in the city’s center becoming one of the most expensive in the world. High mortgage rates The increase in prices fueled intense speculations in the city’s housing market, with many residents resorting to mortgages to get on the housing ladder. Although the average mortgage rate in Shanghai is one of the lowest in China, it is still far higher than that in most other major economies. The consistent rise of the total mortgage value in Shanghai can potentially harm the financial security of the country and the region.

The house price data are collected from the official website of China's National Bureau of Statistics . We acquired the month-on-month growth data of house prices since January 2006, then compiled the house price index based on January 2006 as 100. The Shanghai Stock Exchange Index (SSEI) data which are treated as stock market prices are derived from the CSMAR database. After that, we calculate the monthly house price and stock price return as , where are proxied by the monthly house price index and SSEI, and represent the returns series. 157 observations from January 2006 to March 2019 are obtained.

In 2023, with an average price reaching 46,783 yuan per square meter, Beijing had the most unaffordable residential housing market in China. The costs for housing were also high in eastern economic powerhouses, such as the municipalities of Shanghai and Tianjin, as well as the provinces of Zhejiang, Jiangsu, and Fujian. On average, the price for apartments in the country was 10,864 yuan per square meter in 2023.

In 2018, the average prime property price in Hong Kong was 6.87 million U.S. dollars. Shanghai and Moscow had the next highest prime property prices at 2.43 and 2.38 million U.S. dollars respectively.

Shanghai Property Price: Secondary Mkt: Yangpu: Wujiaochang data was reported at 14,371.000 RMB/sq m in Jan 2011. This records an increase from the previous number of 14,343.000 RMB/sq m for Dec 2010. Shanghai Property Price: Secondary Mkt: Yangpu: Wujiaochang data is updated monthly, averaging 12,457.000 RMB/sq m from Jan 2005 (Median) to Jan 2011, with 73 observations. The data reached an all-time high of 14,400.000 RMB/sq m in May 2010 and a record low of 7,829.000 RMB/sq m in Jan 2005. Shanghai Property Price: Secondary Mkt: Yangpu: Wujiaochang data remains active status in CEIC and is reported by Shanghai Existing Property Index Office. The data is categorized under China Premium Database’s Price – Table CN.PD: Shanghai Existing Property Index Office: Shanghai Property Price: Secondary Market (Discontinued).

As of 2022, among the 741.85 million square meters of residential housing floor area, 23.5 percent were located in the Pudong New Area on the eastern side of the Huangpu river. The central districts of Huangpu, Xuhui, Jing'an, and Changning generally had fewer housing stocks than the suburban areas. The inner city of Shanghai has one of the most competitive housing markets in the world, with the average prices for newly built homes within the city's inner ring road exceeding 120,000 yuan per square meter in 2021.