The North Bund area is expected to be among the most expensive residential areas in the city because of a land shortage and surging relocation costs.
As of the end of September, new housing prices in the area surged 72.7 percent in the first three quarters over the same period last year.
The price of residential project Bundfield, for instance, almost doubled to 30,000 yuan (US$3,614.5) a square meter from 18,000 yuan per square meter in July.
In comparison, housing at Skyline, Lujiazui, the other side of the Huangpu River, was between 20,000 and 45,000 yuan a square meter.
According to the Shanghai Real Estate Association, land prices in the area exceeded 30,000 yuan per square meter.
Since plot ratio, the floor area versus site area, is limited under 2.5, the per square meter price, based on gross floor area, has exceeded 10,000 yuan a square meter.
"Usually, land prices based on floor area account for 50 percent of housing prices," said Liu Qun, general manager of Hong Kong Vina International Ltd. "Surging land prices result from a shortage in supply, as the government controls the amount of residential projects in the region."
Meanwhile, relocation expenses have fueled the growth of the prices.
Along the Bund near Garden Bridge, the North Bund area is bound by Zhoujiazui Road to the north and Henan Road N. to the west. Dalian Road is to the east.
The area, currently home to docks and dilapidated houses, will be turned into a shipping center, a business area, a historical tourist spot and a luxury residential zone, according to the government's plan.
Steven Liu of Cushman & Wakefield said it would take time for the North Bund to compete with the traditional luxury living areas near Nanjing Road and Huaihai Road.
"The riverside location is not enough to create a high-end living area.
"Hongkou District needs to improve its transportation and business functions," Liu said.