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Getting Smart
Expo host Shanghai’s booming property market is as hot as itsburning summers — but it takes some work to understand
| Text : Jennifer Lo | Photo : www.thinkstockphotos.com |
Known as “Paris of the East” and sitting at the mouth of Yangtze River, Shanghai is China’s most vibrant multinational hub, where East and West, communist and new capitalist order blend together. Among its dizzying pace and rapid development, one can expect to embrace a colourful nightlife, gourmet restaurants, ancient traditions, neoclassical architecture, modern skyscrapers — and a booming property market complete with notorious soaring housing prices.
Once a fishing village and textile town, Shanghai, due to its favourable coastal location, flourished as a bustling business and trade centre between the East and West in 1930s. The importance of the city has been reflected in pre-communist Kuomintang leader Jiang Jie-shi’s sentiments: The rise or fall of Shanghai means the birth or death of the entire nation. In spite of political instability, Shanghai, thanks to China’s economic reform in the ‘90s, has quickly re-established the glamour and prosperity of its past in just a few decades. The city is quickly catching up to its southern rival Hong Kong, and is now emerging as China’s window to the world and a culturally diverse metropolis of 16 million residents and a foreign population of around 6 percent.
Shanghai’s property market is no doubt the hottest talk in town recently. The fact that the city government determined to cool the redhot market and curb property speculation is not always good news to homebuyers and investors. The latest attempts include issuing new rules to limit buyers to one new apartment and imposing 2 to 5 percent land appreciation tax on property developers. Citigroup’s analyst Oscar Choi told Reuters he only expected a short-term impact on home prices. “Home purchase restrictions have been adopted in cities like Beijing and Shenzhen, but transaction volumes at the post-implementation stage indicates that demand can still be robust.” According to Shanghai Bureau of Statistics, average housing prices remain 21,100 yuan (HK$25,000) per square metre, when compared to per-capita disposable income of 28,838 yuan (just under HK$34,000) in 2009. The Shanghai World Expo, which wrapped up last month, is another push for the booming market. Just as world expo cities usually benefit from a post-expo property boom, these international events are popular catalysts for rapid urban renewal and development. An example is Vancouver Expo 86, which successfully injected enormous stimulus — infrastructure spending and international exposure — to boost the property market. Similarly, the Shanghai Expo, held on both banks of Huangpu River since May, has sped up the city’s infrastructure development, especially its traffic network. An extension linking the Hongqiao and Pudong airports as well as several metro lines connecting the expo have just been completed, directly benefiting Pudong, Salin, South Luwan and other neighbours of the expo site.
With the exception of the China Pavilion, the Cultural Centre and some other key structures, most of Expo’s construction will be demolished, leaving behind a gigantic site for re-development in the post-Expo period. Colliers International, a property consulting firm, points out in its forecast report, “There would be ample opportunities for property development in next few years, including commercial and residential properties [on the site].” It predicts the two square kilometres of vacant land, given its legacy and location advantage, will develop into 2 to 3 million square metres of gross floor area in commercial and residential real estate targeting high-end buyers.
But actually getting down to purchasing can be tricky, and not necessarily with regards to just paperwork. Shanghai has its own unique protocols that can lead to frustration. If you’re looking for a flat in the competitive housing market, it would be wise to know some of the complex rules that now exist — and if you can find assistance in Shanghaiese even better. Negotiating a price can come down to simple language: you’ll have a better deal if you bargain in the local dialect. Expat real estate agencies do exist, but they usually charge for this extra service. If you have friends in Shanghai, house hunting is the time to ask them for a favour.
Mortgages available to foreign nationals, subject to proof of income, are offered by branches of international banks including HSBC, Bank of America, Citibank and Standard Chartered among others, but banks in China are restricted in the number of loans they can issue — to the extent that buyers have to pay at least 20 percent of the total purchase price. Down payments have been coming out of buyers’ pockets as of January this year.
Though housing prices in Shanghai are several times lower that in more mature cities like New York, London and Tokyo, there are more restrictions imposed on non-locals to curb speculation. Beginning in July 2006, only those who work or study in China for 12 months are eligible to purchase a residential property and those are limited to owner-occupier purposes. Do pick a Chinese name for yourself in case you don’t have one, as it’s required on property licenses. Annoying enough?
But no doubt developing Shanghai into a global financial centre will remain top of the “To Do” list for the Chinese government. Add to that China’s fast-growing economy (an average growth rate of 7 percent annually) and you’ve got a superstar in China that will be understood and re-understood for years to come.
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