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Chinese property developers are increasingly favoring smaller luxury developments consisting of about 100 units, enabling them to acquire smaller land parcels in prime downtown areas instead of committing to large-scale, high-end complexes.
This trend is especially evident in Hangzhou, a city known for its dense concentration of tech magnates and private entrepreneurs. For instance, a luxury residential project launched this month in Hangzhou features only 168 units, ranging from 296 to 876 square meters. Despite the small size, the development offers upscale amenities such as indoor and outdoor swimming pools, fitness centers, yoga studios, an indoor basketball court, and an indoor golf simulator.
A recent auction in Shanghai’s centrally located Hongkou District saw a 7,115-square-meter plot go for a premium, with bidding ending after 63 rounds involving 12 developers and a final premium rate of 36%. Assuming an average apartment size of 200 square meters, the project would include just over 80 units. Similar intense competition and high premium rates have also been observed during recent auctions in Beijing, Nanjing, and Suzhou.
A senior executive from a leading developer explained, “Since this year, we’ve stopped bidding on large land parcels. Our focus is now on plots no larger than 50,000 square meters because the approach to high-end housing has fundamentally shifted.”
Smaller plots in prime city centers involve lower initial land costs, requiring only between CNY 200 million and CNY 300 million (roughly USD 29.5 million to USD 44.3 million) in capital, which significantly reduces financial barriers for developers, according to Yan Yuejin, vice president of the E-House China Research and Development Institute.
He added, “Additionally, these plots are surrounded by well-developed public infrastructure, ensuring that completed projects tend to have strong market liquidity. Even if individual projects face modest losses, they won’t significantly impact a developer’s overall financial health.”
While larger residential developments with around 2,000 units might take five to ten years to complete, smaller projects of about 100 units can be sold out quickly, helping developers turn over capital more rapidly.
Heightened risk aversion also plays a role in shifting interest away from large projects. “Holding extensive land reserves was advantageous before 2022, but it has become a liability since then,” the executive noted.
He further explained, “The number of high-net-worth buyers isn’t unlimited. Each city has a cap on how many ultra-luxury homes it can absorb. Small-scale luxury projects are tailored to this limited demand, helping maintain product scarcity and price stability.”
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