Ten Billion Dollars Goes Into Shanghai Real
Estate Market in 2003
An estimated US$10 billion of international investment
funds entered the Shanghai real estate market in 2003,
driving real estate prices to new market highs.
According to FIABCI,
a leading real estate federation, real estate prices in
Shanghai are now at a peak, and most likely will track
down in the near future. During 2003, a slow international
real estate market, with the exception of China, drove
considerable funding into the Shanghai real estate market.
While most of the commercial real estate in Shanghai
was largely developed with government funding, and Hong
Kong and Shanghai developer funds, only in 2003 have the
larger US investment banks begun investing in Shanghai
residential property. With their international asset
management experience, these banks are able to offer premium
Shanghai property to their international clients.
The Shanghai municipal government, anxious to diversify
its investment resources, has actively encouraged other
banking firms to come into the Shanghai market. It has
also been involved in moves to introduce zoning
laws to the city. Throughout Shanghai, there is a
strong focus on turning the city into an international
cosmopolitan city on the same level as New York, London
and Paris.
Prior to the foreign money coming into Shanghai, the
most active domestic investment groups were from Wenzhou
in Zhejiang province. Compared to other cities, Wenzhou
has a much higher percentage of private enterprises, and
Wenzhou companies and individuals would form informal
"home-buying associations" to speculate on Shanghai
property. These home-buying associations would even compete
in competitions to see which could close the most deals
in the shortest possible time. Many Shanghai natives blamed
them for the rapid rise in property prices.
The US$10 billion is a rough estimate of inflow, since
real estate investment funding often flows outside normal
banking channels. When it comes to tracking real estate
in China, zoning laws are largely non-existent in the
cities, where residential and commercial real estate are
often in the same buildings. Now, Beijing and Shanghai
are attempting to introduce changes in this area, with
varying degrees of success depending on the neighborhood.
Before you go, did you like this article?
If so, you can receive a free email newsletter version
each weekday. Sign up using the China Business Express
form on this page.
