Shanghai property prices buck the trend with 5.3pc increase

Shanghai's luxury flat prices rose 5.3 per cent in the second quarter from the first quarter, thanks to a stock market fund outflow and continued purchases, a report by Jones Lang LaSalle showed.

The average price of flats of more than 180 square metres in the city's prime locations jumped to 31,425 yuan per square metre compared with a 0.6 per cent decline in the first quarter, Jones Lang said.

'It's a significant growth because in the past two years the market was pretty much flat,' said Kenny Ho, head of research for Jones Lang LaSalle Shanghai. 'Local investors cashed in on the stock market and turned to properties. There is also a push from overseas buyers who are bullish on the economy.'

The luxury property sector reeled from a government policy last year which restricted foreign ownership of mainland flats.

However, luxury houses gained ground in the second quarter as investors cashed out from the stock market on fears of increased volatility.

Overseas investors including those from Hong Kong and Taiwan also flocked to the mainland's most developed city to snap up flats, betting on further growth.

'With limited new units on the way, luxury prices on the secondary market will experience more upward pressure,' Jones Lang said.