Developing Real Estate Market in Shanghai

Developing Real Estate Market in Shanghai

Shanghai is the so-called dragonhead at the mouth of the Yangtze River Delta. It is also one of the four directly administered cities with high level of political autonomy without the constraints of any provincial government above her. With the exception of the period between 1949-mid1970’s, Shanghai has always been China’s principal gateway to the world.

The total area of Shanghai is 6340.5 square kilometers. The population of Shanghai at the end of 2002 was 13.3 million with 76.4% as non-agricultural population and the population density of Shanghai was 2104 per square kilometer, which is one of the, if not the, highest among all provinces in China.

Following the major trend of open door policy and economic reforms in late 1970’s, Shanghai was designated by the central government in 1984 to be an open port city to serve as a recipient point for capital investment and technology transfer from developed nations. Due to the leading position of Shanghai in the Yangtze River Delta, it was hoped that the success of expanded economic development in Shanghai would spiral down to the entire Yangtze Delta and eventually to the lower and middle Yangtze Basin.

Until the late 1980, foreign investment and economic developments concentrated mainly on the existing urban core, namely Puxi. But in April 1990, the Shanghai government announced Pudong (eastern part of Shanghai) as a new development zone for a more structured plan to receive investment for infrastructure and economic growth. The new area is similar to the size of the urban area in Puxi and is the focus of China’s reform and open policy in the 90’s.

The recovery of the economic growth in Shanghai started with the economic reforms in China in early 80’s. The opening up of the economy of the selected coastal cities led to prosperity in these areas and Shanghai is one of the members in this privileged club. The performance of the economy can be observed from the following table :

Table 1 : Major Economic Indicators in Shanghai

Year GDP/capita (in yuan) Tertiary Industry added value (in 100 million yuan) Real Estate Sector added value (in 100 million yuan) Government revenue (in 100 million yuan)

1970 1446 28.43 0.08 99.9

1985 3855 121.59 0.58 184.23

1990 5910 241.17 3.75 170.03

1995 18942 991.04 91.29 227.3

1996 22275 1248.12 124.26 288.49

1997 25750 1530.02 147.51 352.33

1998 28240 1762.5 185.4 392.22

1999 30805 2000.98 210.53 431.85

2000 34547 2304.27 251.7 497.96

2001 37382 2509.81 316.85 553.86

2002 40646 2755.83 328.86 719.79

Source : Statistical Yearbook of Shanghai, 2003

Note : since early 1990’s , the official foreign exchange rate between US$ and Yuan is around 1: 8

The popularity of the Shanghai real estate market brought about by the urban land reform does not only bring in substantial income for the local government, but also a geographical change in the city landscape as well as living condition. Table 2 below shows that slum housing has been displaced dramatically, mainly by the more commercially viable uses such as office and retail uses in urban Shanghai. The interesting picture is that while most non-domestic land uses have witnessed increase in area, industrial land use is certainly outpaced by retail and office uses. Moreover, displacement of industrial floor space in the CBD area has not been matched by any corresponding increase of industrial contents in other districts. This implies that there was indeed an over-use of industrial land in the city centre due to the inefficient administrative allocation system of land and rationalisation of land uses is well under way (Li, 2003).

Table 2 : Changes in Building Types in Urban Shanghai

(in gross floor areas -10,000 sq. meters )

1978 1980 1990 1995 2000 2002

Total 8653 9134 17256 22094 34206 43432

Domestic housings 4117 4403 8901 11906 20865 26906

Villas 128 134 158 179 250 580

Apartments 90 92 118 111 206 223