Shanghai

As of 2006 property transaction centres in Shanghai require foreigners to show immigration records when buying homes to prove that they have lived on the Chinese mainland for more than a year. The measures came in as part of a drive to restrict overseas property investment amid fears that a flood of foreign capital could aggravate speculation in the housing market.
Under the new policies, foreigners can’t buy homes or apartments on the mainland until they’ve been here at least a year. Further, those who meet the residency rules must purchase property only for their own use and cannot lease it to others. The regulations go further in certain areas of the city. In four Shanghai districts, Jing’an, Xuhui, Baoshan and Pudong New Area, foreigners and overseas Chinese have been banned from buying second homes within their jurisdictions.
Among other measures, overseas institutions and individuals that want to purchase property for purposes other than their own use must set up a company in China, according to a joint circular issued by six government agencies.

The somewhat draconian initiatives stem from the fact that real estate in Shanghai is in comparatively short supply and is seen by many experts as overpriced. However, there have been attempts to increase supply and prices, for a number of reasons, have been leveling off of late. Investment in offices and residential properties accounted for 66 per cent and 13 per cent of total investment in Shanghai in 2007.
Investors have shown a particular interest in the city’s office and retail sectors, as well as in holiday/resort properties. However, Shanghai’s residential and apartment property markets are still drawing investors.

Shanghai is also set to become home to the World’s tallest financial centre which on completion will measure 492 metres and include 101 floors. Developers say the Shanghai World Financial Centre will be a hub in the drive to transform Shanghai into one of Asia’s leading financial centres.
Much of the interest being shown in Shanghai by overseas investors is in large scale projects and of late, companies from the Middle East, famous for their rich capital supply, are leading the pack. There are at least five capital companies from the Middle East which have become active in the Shanghai housing market since 2006 and many more are eying up investment opportunities. Among them is Emaar, which is the largest listed real estate developer in the Middle East, and is building what is claimed to be the world’s highest building in Dubai. Emaar is targeting Shanghai as the first location of it’s march into China.

However, Middle-Eastern companies have a long way to go before they dislodge the US at the top of the country-of-origin rankings of overseas investors involving themselves in the city’s property market. At present, 50 per cent of all housing investments have come from investment funds from the United State.
The success of Shanghai’s property market however, has been cooled somewhat by anti-speculation measures being taken by the Chinese government. City officials along with the central government have vowed to intensify real estate industry regulations and balance demand and supply so as to curb housing price hikes.
The municipal government has begun to implement regulations of ‘no less than 30 percent of mortgage down payment’, market access and administration on foreign capital. The moves come alongside a concerted attempt to increase the supply of commercial land for housing purposes. Included are 50 hectares in downtown areas.
Meanwhile, the approval of new land for development will be tied to land stock to heighten the utilisation efficiency of approved projects. Shanghai is building marketable apartment buildings with a combined floor space of 6 million square metres this year. Included are buildings with 4.5 million square metres sold in advance.

Condos
Under normal circumstances, foreigners who buy properties in Shanghai have to be able to prove that they have lived on the Chinese mainland for more than a year. Further, those who meet the residency rules must purchase property only for their own use and cannot lease it to others. The regulations go further in certain areas of the city. In four Shanghai districts, Jing’an, Xuhui, Baoshan and Pudong New Area, foreigners and overseas Chinese have been banned from buying second homes within their jurisdictions.

Other measures being brought in which overseas buyers of condominium units should be aware of is that residential properties will soon be forced to adhere to strict guidelines aimed at making them smaller and more energy efficient. The municipal government has ordered that from 2010, all new apartments will have to be an average of 15 per cent smaller than at present, and be 65 per cent energy efficient. They will also be required to recycle rain and river water and be constructed mostly from reclaimed materials. The move is aimed at achieving a more sustainable development for a city.

Residential buildings take up 37 per cent of all the land used in Shanghai and units are 120 square metres on average. In order to reach its goal of a 15 per cent reduction in size the government will increase the proportion of small and medium-sized apartments in new residential projects and improve the supervision of land supply and planning while at the same time applying higher standards in energy conservation. All new houses must be able to save 65 per cent of energy, compared with the current standard of 50 per cent, energy-saving light bulbs and air conditioners will be promoted, and solar-energy and rainwater recycling facilities will also be used.

Houses and Land
Land for housing in Shanghai is at a premium, so investors can expect to pay prices to match. However, there are a number of large projects currently underway, not least among them is Keppel Land Ltd’s recently announced fourth residential development in China’s gateway city. The company has revealed that it is poised to capitalise on the urban expansion and growing real estate market of Shanghai, with a new large-scale residential project in Nanhui District.

The Company has acquired a 100 per cent stake in Shanghai Hongda Property Development Co. Ltd, which owns a sprawling residential site in the Nanhui district of Xinchang Town in south-eastern Shanghai. The full details of what will be constructed have not yet been released, although the total cash consideration for the acquisition is RMB 70 million (US$13.6 million). The Nanhui District has received significant government infrastructural spending and real estate investment in recent years, owing to its strategic location adjacent to China’s largest port facility, the Yangshan Deep Water Port off Hangzhou Bay.
The Shanghai government is also planning to develop the south-eastern tip of Nanhui District into a Harbour City.

Renovating
Shanghai boasts a number of ‘old houses’ built before the Communist revolution 1949. Many however, have problems with the electricity, pipes and plumbing. That said, there are many well renovated and charming old houses which tend to prove popular among renters.
Historical buildings with old renovated apartments (typically within the former concession areas of Shanghai) are more expensive than units in new residential compounds, despite sometimes suffering from rusty water pipes and insufficient electricity to power an expat family’s air conditioner use in the hot summer months. A new villa or apartment downtown costs about twice as much as a similar place in Pudong or Hongqiao. However, the outskirts of Shanghai (“local” districts) offer limited property which is up to the standard that an expat would expect, and since housing in these areas is very cheap it might be worth to keep an eye out for a place that can be bought for a low purchase price and then renovated.