Shanghai housing boom turning to bust
By Samuel Shen and Irene Shen (China Daily)
Updated: 2005-12-15 06:50

It's a turnaround from the pre-June boom, when would-be buyers sometimes had to wait in line for days to register for popular developments, and local newspapers were peppered with stories about rich entrepreneurs from Wenzhou and other cities arriving with bags of cash to invest in real estate.

"I brought a chair with me and sat all night," said Ding Ou, 30, who bought a home in the city centre in 2002. "The market was crazy, and it got much crazier afterwards."

Darkened windows became a common feature of the night-time cityscape, as developers and speculators stockpiled vacant apartments in anticipation of further price increases. Prices jumped 19 per cent in the first quarter of 2005 from a year earlier, prompting central bank Governor Zhou Xiaochuan to say Shanghai's home prices were worthy of "concern and attention."

The central bank in March raised the minimum interest rate lenders must charge on home loans and encouraged them to demand bigger down payments. After those measures failed to dampen price gains, the central government ordered local authorities to apply a 5.5 per cent tax on the sales price starting in June.

The State Council said in March that rising property prices are threatening financial and social stability in China, in a six-page circular that ordered local governments to take steps to curb "excessive" growth.

In Shanghai, a 100-square-metre new apartment costs an average of 914,000 yuan (US$112,800), according to the Shanghai Real Estate Exchange. That's 55 times last year's average disposable income of 16,683 yuan (US$2,059). The comparable ratio for the UK is 5.5, according to HBOS Plc, the nation's biggest mortgage lender.

(China Daily 12/15/2005 page10)