AS she prepared for her upcoming wedding in early December, Ye Qing became increasingly uncertain about whether it had been wise to spend 890,000 yuan (US$10,760) on a second-hand apartment in November.

　　Housing prices in Shanghai still hover at record levels, but scattered reports have predicted that the bubble in the Shanghai real estate market will soon burst. The soon-to-be bride was worried about the loans she had to pay back each month. If the so-called bubble bursts, how much would her apartment be worth?

　　A real bubble?

　　Andy Xie, Morgan Stanley's chief economist for Asia-Pacific, is one of the analysts who say that Shanghai's real estate market is overheated and warn that heavy speculation in the property sector would soon lead to the bubble bursting, according to the Economic Observer.

　　The Oriental Morning Post reported an inflow of over

　　US$1 billion shortly after the central bank's interest rate hike.

　　Statistics from the official Shanghai real estate website showed the average price of housing sold on November 15 exceeded 10,000 yuan (US$1,200) per square metre, a price level considered by some analysts to be a result of speculation.

　　Pang Yuan, deputy director of Shanghai Housing and Land Administrative Bureau, said the growth of the Shanghai real estate market was healthy in general this year, citing the latest statistics for the first 10 months.

　　These official statistics show local residents accounting for 80 per cent of the housings sales in Shanghai, with resident of other parts of the country making up 16 per cent. Overseas buyers only account for 4 per cent of the market.

　　"The figures clearly indicate that local residents rather than foreign investors are the main power contributing to the market's prosperity," Yuan said. "As we discovered, most of those houses are bought for the owner's use."

　　In the first 10 months of 2004, housing priced below 6,000 yuan (US$725) per square metre accounted for 56.8 per cent of the pre-sale gross floor area (GFA) of the Shanghai property market, while high-end property priced above 9,000 yuan (US$1,088) per square metre accounted for 13.8 per cent, according to official statistics.

　　An analyst surnamed Wang from FPD Savills, a real estate consulting firm operating in Shanghai, pointed out that since most low-priced houses are scattered in suburban areas, they would gain popularity among consumers only after public facilities such as transportation systems were improved.

　　Statistics also show that, though the average price of high-end property surged 20 per cent, the average price of housing between the mid-ring and outer-ring area increased by only 6.26 per cent, while the area outside the outer-ring dropped 2.28 per cent.

　　Professor Liu Jinchun, an expert from the Shanghai Academy of Social Sciences, said it was doubtful whether a real estate bubble existed in Shanghai.

　　"According to our research, the boom in the property market is mainly due to local residents' huge demand, which has been mounting since the slowdown in the sector during 1997 and 1999."

　　More price hikes?

　　Though the boom in the local real estate market has lasted for about two years, analysts and industry insiders still appear optimistic about the market and predict that housing prices will continue to rise in 2005.

　　Freddy Lee, general manager of Shui On Land Limited, said the high demand in the market still hadn't been satisfied.

　　"Even in downtown areas, there are families living in very poor conditions," Lee said.

　　Reconstruction of the old city will further improve the living environment and attract more people to live in Shanghai, which promises additional long-term growth, added Lee.

　　On September 1, China adopted new regulations ordering all land transfers to be completed in government-run transaction centres, either through public tenders or through auctions.

　　Land supply has dwindled since the adoption of the new rules and the move has raised developers' cost.

　　"The increased interest rate is another factor that may push property prices higher nationwide," said Ren Zhiqiang, chairman of the Huayuan Group, a major developer in China.

　　By Wang Xu