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Mayor: Shanghai to cool soaring property prices

(Agencies)
Updated: 2009-08-06 08:05

The city government plans to speed up construction of affordable housing for low income families in the second half. [CFP]

Shanghai will take steps to cool the city's real-estate market as housing prices in China's financial capital are "too high," Mayor Han Zheng said.

The city government will increase the supply of land for property development and speed up construction of affordable housing for low-income families in the second half of this year, Han, 55, said yesterday in an interview in Shanghai.

Record bank lending in China drove average prices for new homes 6.3 percent higher in June in 36 large- and medium-sized cities, according to government data. That gain came even as urban unemployment rose and wage growth for workers in Chinese cities slowed.

"The government should do something to effectively control the speed of growth of the real estate market," Han said. "The housing price in Shanghai is already too high. We must prevent excessive inflation of home prices in this market."

Home prices in China will rise 20 percent by the end of 2010, UBS AG analyst Eric Wong said on July 30. Shanghai's property market will probably be the strongest in the country and residential prices may climb as much as 20 percent over the next year compared with the final quarter of 2008, according to Stanley & Partners Investment Management Co, citing recent land-option contracts and commodities.

Registered urban unemployment rose to 4.3 percent at the end of the first half from 4.2 percent at the end of 2008, according to government data. Average first-half wages in China's cities grew 12.9 percent, 5.1 percentage points slower than a year ago, the statistics bureau said.

Han Zheng

Investors have been quick to capitalize on the rebound in China's property market. Real-estate stocks gained the most among the five industry groups on the Shanghai Composite this year. Gemdale Corp, a Shenzhen-based developer that got 35 percent of its sales from Shanghai, has more than tripled.

Shanghai's government is also continuing to work on policies to emulate the world's financial centers, Han said. The central government said in March it planned to make Shanghai an international finance hub that is commensurate with the nation's economic strength by 2020.

Making the yuan a more global currency will be key to achieving that goal, Han said.

"The yuan is still not an international currency and still not freely convertible," he said. "That's why the measures we've taken in Shanghai with regards to financial innovation and our efforts to become a more sophisticated financial market are all centered on boosting the position of the yuan."

Fang Xinghai, director-general of Shanghai's financial services office, has urged changes in foreign-exchange rules and other steps to encourage foreign private-equity firms to set up in the city, the Wall Street Journal reported yesterday, citing an interview with Fang.

Special Coverage: Housing in China Related readings:  Demand for CBD space is still healthy: official  Investors looking to cash in on hot realty  Mainland real estate market back on growth track  Luxury home sales growth robust in Q2

Shanghai's mayor also said he is still awaiting final approval from the central government for a $3.59-billion Walt Disney theme park to be built in the city. Disney and Shanghai reached an agreement in January, almost three years after Mayor Han said in March 2006 that Shanghai was making "preliminary preparations" to build a theme park.

"We've been in love with each other for many years and we have a very strong commitment to each other but we don't know when the wedding will become a reality," Han said.

Disney opened a theme park in Hong Kong in September 2005. During its first three years of operation, Hong Kong Disneyland has averaged 4.5 million to 4.6 million visitors a year, Helen Chan, an economist for the city government, told lawmakers last month. That compares with an initial target for the park to draw 4.2 million to 5.6 million visitors a year, Chan said.