Shanghai Municipal Government Press Conference Memo(September 29, 2004)

Eastday.com: As you've just suggested, what concrete measures will the relevant governments take to protect historical and cultural buildings in protected zones? What punishments will be meted out for the destruction of excellent historic buildings?

Jiao Yang: As for the existing buildings of historical and cultural interest in protected zones, the city's planning department has divided the architecture that will need protection and renovation into five groups.
1). Buildings under legal protection, refers to all levels of revered buildings that have an long and important history, the three groups of excellent historical buildings as determined by the city government;
2). Preserved historical buildings refers to those old buildings with well maintained architectural characteristics. According to the regulations, complete remodeling is not permitted on these buildings;
3). Ordinary historical buildings, refers to buildings that feature ordinary architecture but are part of a whole architectural structure. For these buildings, either partial preservation is required, or the entire structure must preserve the original style or pattern.
Complete restructuring is allowed for these buildings, but the original style must be preserved. Also, the reconstruction requires approval from the administrative authority as well as an expert team of architects;
4). Buildings that must be demolished mainly refers to dilapidated buildings or those that have become eyesores on the city's landscape and cannot be restructured to match their surroundings;
5). Other buildings, includes newly-built buildings, those under construction, and those that can be attuned to their surrounding environment by re-structuring. (Those needing preserving or a face-lift.)
As for your second question, in the regulations there are clear punishments for destroying excellent historic buildings.
In detail, the punishment is as follows:
* For acts that randomly change building use, interior design and functions without government approval, or acts that threaten the structure抯safety, the real estate authority will demand restitution and will probably impose a penalty equivalent to between 2 and 20 percent of the building's value;
* For renovations that fail to meet government regulations or technical standards, the real estate authority will demand restitution and probably a penalty equivalent to between 3 and 30 percent of the building's value;
* For random relocations of buildings, the planning authority will demand restitution or restoration and probably a penalty equivalent to one to three times the building's value;
* For randomly dismantling buildings, the planning authority will demand restitution or restoration and probably a penalty equivalent to three to five times the building's value. Violators must receive approval from the planning department for the restoration.
Of course, those who have violated the law must be subjected to criminal punishment.

Dragon TV: You have just said that all buildings that feature Shanghai's historical periods and contain cultural and artistic value must be protected. As I know, in Hongkou District there is still a building left where the Japanese army operated a military sex service in the 1930s. My question is: are these kinds of buildings also under protection? So far as I know, according to Hongkou's urban planning, this building will be replaced by a green space. Since the historical values of these buildings no longer exist, should we still protect them? And how do we protect them?

Jiao Yang: The 398 historic buildings of the last three groups have been published on the website but those of the 230 buildings in the fourth group have not yet been published. In this sense, I can't accurately tell you whether this building you have referred to is under protection. But one thing is for sure, the city government's resolution to provide the strictest protection for historical buildings is of no doubt.
At work meetings, Mayor Han Zheng mentioned how we will set up a strict protection system.
First is the conception. Governments at all levels and the whole of society must understand that protection is as important as construction for development. We can't cut off Shanghai's historical ties.
The second is mechanism and regulation. When planning, we must outline the protection zones and structures according to the regulations. Then, we must ensure the implementation of the regulations. We must establish a long-term management system for funding and regular management. Protection will be ensured only if we apply the regulations strictly in all cases.

Shanghai Daily: You've mentioned that five groups of buildings are under protection. Then into which group do buildings built before 1949 fall? And how would the government protect those buildings that have already been sold to developers? What is the total area of the buildings built before 1949? And where are most located?

Jiao Yang: The local authority has surveyed buildings that need protection. A further inspection based on the results of the survey is needed before we work out a concrete renovation plan. According to the initial survey, there are 12 million square meters buildings built before 1949.
Speaking of protection, we need the cooperation of the whole society because of the huge area of the historic architecture zones and excellent historic buildings. Currently, on a trial basis we are seeking to improve our protection efforts via the market mechanism. All parties in the society are encouraged to join the program if they are capable of handling the work according to the regulations. The principle is that the government provides support, experts give guidance and control the quality, corporations operate, citizens participate, and all social groups cooperate. Developers must do their duties according to the laws and regulations as well as meeting the appropriate legal responsibilities.

Jiefang Daily: Since the market mechanism was introduced into the conservation of local historic buildings, the relocation fees charged by residents in these buildings have become exorbitant. Will the municipal government give them preferential treatment and meet their demands?

Jiao Yang: Shanghai has its special difficulties in protecting historic buildings. Usually, a local historic building houses quite a few families. The poor housing conditions pose a real challenge to the building's conservation. To relocate the residents in historic buildings is now an urgent task for the city. however, a dilemma arises when the residents have to dedcide whether or not to resettle. Although life is hard for those living in crowded housing, they ask for much higher relocation fees than the fees government can afford. In fact, the municipal government has taken their interests into account. Residents living in historic buildings are offered a somewhat higher relocation fee than other residents. We hope that these residents will cooperate with the government to protect historic buildings, which are the common property of local citizens.

Xin Ming, Evening Post: According to the municipal Bureau of Real Estate, the main construction limit of middle-low-price housing blocks has been extended to the Outer Ring Road. It is understood that due to the rise in land prices, the original price (of 3500 yuan (US$ 424) per square meter) would be exceeded. If so, what is the future price? Thank you.

Jiao Yang: I've also noticed similar reports in the newspapers. The municipal government has sped up the construction and promotion of common commodity houses that are priced at lower than 3500 yuan per square meter, in order to meet the pressing needs of the residents who move away in order to cooperate with significant municipal constructions. 1,370,000 sm of houses have been completed - 940,000 sm recently commenced and 4,200,000 sm opened to the market between January and August this year. It is planned to start the construction of another 2,560,000 sm of houses, taking the total area to 8,000,000 sm this year . Meanwhile, we will increase the availablity of land for common commodity houses. To be frank, the municipal real estate bureau once received some complaints from the exceptional houses' development units that their burdens were too heavy due to heavy cost but low prices. However, the related departments hasn't considered revising the price of these common commodity houses.

Shanghai Municipal Government Press Conference Memo (November 24, 2004)

Shanghai Morning Post: It is reported that overseas investors are pumping huge amounts of capital into city real estate. Local residents consider the existing housing prices already too high to afford. Has the surge of foreign investment driven up the property prices?

Jiao Yang: Based on statistics and analyses, in recent years, local residents were responsible for about 75 percent of all local property purchases, while out-of-town Chinese took 20 percent; this means that only five percent of the property was bought by overseas people. That proportion is reasonable. During the first ten months of this year, Shanghai residents bought a little more than 20 million square meters of apartments, or about 80 percent of the total; out-of-town Chinese purchased nearly four million square meters of housing, or nearly 15.5 percent of the total; overseas people purchased the rest, less than four percent of apartment spaces, or 99,000 square meters, a slight decline from the same period last year. Therefore, the current mix of buyers in the local property market is reasonable.
Shanghai's real estate market is an open and uniform market. It serves local residents and citizens in other Chinese cities, as well as buyers from around the world. As the national economic guidelines, especially credit policies affect the local property market, we will pay special attention to how exchange and interest rate changes and stock market fluctuations might affect the housing market. And we will closely watch the inflow of overseas investment into the Shanghai real estate market.

Shanghai Municipal Government Press Conference Memo (December 22, 2004)

Shanghai Finance News: Preparations are now in hand to establish an online transaction system for used housing. Will it hurt local real estate agencies?

Jiao Yang: The government is building an online system which will provide transparent housing information. On the basis of this platform the city will also create an online transaction system for used houses. All the steps necessary for used housing transactions (housing information publication, deal negotiation, contract signing, property registration, etc.) will be completed online. As an effort to make the non-profit transaction system safe, convenient and efficient, the website will also provide financial, notary and evaluation services for housing transactions.

The development of real estate agencies, which is essential to the local housing market, always remains high on the government's agenda. Following the government policy of promoting local secondary and tertiary real estate markets, in August of 1996 the Shanghai Housing and Land Resources Administration set up real estate transaction centers at city, district and county levels. Many agencies that opened branches in these transaction centers at that time have developed into well-known companies.

Local real estate market should keep abreast of the times. Quite a number of real estate agencies will post housing information online in the future. The online transaction system will adopt a series of measures for the convenience of the people. House sellers can put housing information online without any charge. The website will also help home buyers choose real estate agencies since agencies can put their housing information online. E-business is the trend of the times, which real estate agencies should comply with. On the other hand, Housing information will be put online by real estate agencies on a voluntary basis. The online transaction system can not be established at once and will be improved gradually. 

Real Estate Times: As an institution, local real estate transaction center undertakes the creation of the online transaction system. Will the center be able to handle online fraud cases? Secondly, you said before that the government would keep a close watch on overseas investment in the local real estate market. How are things going now?

Jiao Yang: The online transaction system can not be established at once and will be improved gradually. Housing information will be put online on a voluntary basis. We will take measures to guarantee the truthfulness of online housing information. As to the second question, I have said before that the proportion of domestic investment to foreign investment in local real estate market is reasonable. I have no additional remarks to make.

Shanghai Municipal Government Press Conference Memo (January 25, 2005)

Real Estate Times: Among the many real estate indexes released recently, there is no one indicating the average property price of last year. Shanghai's average housing price was 5,118 yuan (US$616.6) in 2003 and the just released index indicated that the property price of last year increased by 15.8 percent from a year earlier. Does that mean that we can get the average housing price from the two figures (5,118 * 115.8 %)? A spot check of 3,000 local households last December showed that more than 60 percent of local residents had their own homes. The proportion is different from what you released before. Can you explain it?

Cai Xuchu (Chief Economist with the Shanghai Statistics Bureau): All of you are concerned about the local real estate market. I will talk about three issues: first, a general judgment of the real estate market of last year; second, why the housing price released by the government statistics department disaccords with what local residents are feeling; third, a general prediction of the real estate market trend this year.

As to the first point, based on some statistical data, our general judgment on the existing real estate market: the demand and supply are both large, making growing contributions to the national economic growth. Last year, the added values of local real estate sector increased by 20.4 percent from a year earlier, accounting for 8.4 percent of the local GDP. Shanghai's economy grew by 13.6 percent last year, with 1.3 percent contributed by real estate industry, up 0.5 percentage point from a year earlier. The local real estate development further improves the residents' living standard and quality. Last year, residents had a living area of 14.8 square meters per capita, up one square meter from the previous year. A total of 92.5 percent of residents lived in apartment suites. 

However, there are still problems in the local real estate market, in three aspects:

First, there is a large and balanced demand and supply in the local real estate market, while demand is a bit greater than supply. Last year, construction of a total of 30.7619 million square meters of residential properties were completed, up 43.7 percent from a year before; a total of 32.3374 million square meters of residential properties (including both pre-sold and existing homes) were sold, up 38.5 percent from the previous year. Unsold housing areas declined by 51 percent to 1.2649 million square meters last year, with only 758,400 square meters of properties unsold for more than one year, down 21.9 percent from the previous year. According to the statistics from the Shanghai Housing and Land Resources Bureau, the ratio between supply and demand is 1:1.07, with demand a little greater than supply.

Second, the supply structure is reasonable, but the supply of ordinary residential housing is not enough. Last year, 55.6 percent of pre-sold homes were priced below 6,000 yuan per square meter; 28.7 percent were priced between 6,000-9,000 yuan and 15.7 percent were priced more than 9,000 yuan per square meter.

Third, the housing price growth slowed, but in certain areas, the prices grew too fast. Last year, prices of residential properties increased by 15.8 percent from a year before. The growth margin in the downtown area was much higher than that outside the city's Outer Ring Road, with the average price inside the city's Inner Ring Road rising by 27.5 percent while that outside the Outer Ring Road up 10.7 percent from the previous year.

The second piont: we release commercial home price statistics according to a certain formula, which  divides the total sales volume of  apartments by their total area, generating an average price. Such a composite average only reflects fluctuations in prices for apartments sold. According to the statistics released, we re-calculate to get an average home-sale price for 2004; which is 6,385 yuan per square meter, up 14.6 percent over 2003. Now we have another figure, 15.8 percent, which is the total sum calculated from nearly 300 current real estate samplings. It reflects the general changes in home prices. Therefore, the two figures, 14.6 percent and 15.8 percent, though different in sampling targets and calculation, both indicate the same rising trend in home prices.

One thing to point out is that the figure of 14.6 percent is calculated by comparable parameters, which includes homes sold both  on or before completion . Before year 2003, the home price growth figures only included the completed apartments which were in use. Since 2004, the calculation started to include the pre-sold homes, in order to reflect the sales prices more objectively.

Then why do people find obvious differences between the release and the situation they feel in reality? That's because it's only an average and I'd like to reason it in the following ways.
First, the supply of a great number of economy homes diluted the general price hike. The economy homes are those specially offered at low prices to the relocated families who were affected by the city's infrastructural constructions. The target beneficiary group is so small that most citizens don't feel the wave. But the total area of these apartments accumulated,  accounting for  19.7 percent of all the homes sold last year, such that the general price rise is obviously flatted.
Second, the commercial homes sold have distinguished price changes from regional differences. The homes outside the Outer Ring Road are sold in large quantities with only moderate price rises, greatly lowering the city's average home price. But as most of the local families are living inside the Inner Ring Road, or between the Inner Ring Road and Outer Ring Road, they can hardly feel the punch.

Third, the price rise that most people learn from the Internet are higher than in reality because some realtors fake contracts and hike prices. They make use of the Internet to contract online at high prices and then stealthily cancel it. Most of the fake prices are higher than the average of the home sold in reality. Therefore, the online price releases can be deceptive and the cancelled contracts are generating price bubbles.

That's why people don't feel the same as our figures can reflect.

The third point:  Generally speaking, we think the real estate market will achieve satisfactory development in 2005 with the housing price growth further slowing down.  The government has published some control goals, with which the property industry will make very good development.

Shanghai Municipal Government Press Conference (March 16, 2005)

Shanghai Evening Post: For ordinary citizens, local housing prices are prohibitive. Do you have any comment on this situation? What countermeasures will the government take to control property developers who are inflating housing prices?

Jiao Yang: The municipal government has expressed its attitude by adopting various policies to regulate the property market. Although the local real estate economy remains healthy, the property market faces some new problems. First, housing supply still falls short of demand despite the fact that the market has shown signs of restoring supply-demand balance.  The current Demand/Supply ratio for local housing is 1.07:1. We hope housing supply will slightly exceed demand. Second, although the ratio of luxurious housing to low- and moderate-income housing is becoming more rational, the supply of affordable housing is still inadequeate. In fact, to build more affordable housing for ordinary citizens is an integral part of the government's new policy for the local property market. Third, although the increase in local housing prices has slowed down as a whole, some neighbourhoods of the city are still experiencing a rapid rise in housing prices. The government's new policies are aimed at adopting more effective methods to solve the existing problems in the property market, to encourage the smooth, sustainable and healthy development of the market and to improve the living conditions of local residents. 

Shanghai Municipal Government Press Conference (March 30, 2005)

Wall Street Journal: Has the Chinese central government issued detailed circulars to the Shanghai government to put a lid on the soaring property prices in the city? Are there any measures from the CPC Shanghai Municipal Committee and Shanghai Municipal government to curb the increasing housing prices? Are the senior local officials, such as the Party Secretary and Mayor, responsible for the soaring property prices?

Jiao Yang: Recently, Shanghai has issued a series of policies to curb the excessive increases of local property prices, and all of them are based on the central government's macro-control policies. The policies are also an embodiment of the city's efforts to establish a scientific view of development and to maintain a coordinated society. There are many such policies which have been described in the previous press conference. Around March 7, Shanghai successively issued a series of policies to maintain a healthy development in the local real estate market, and they are available at the city government website. Moreover, some financial and tax policies were also issued which can be offered to you after the press conference. Shanghai Party Secretary Mr. Chen Liangyu and Mayor Mr. Han Zheng are both paying careful attention to the healthy development of the local real estate market, and all these policies have been worked out based on their concerns and recognitions. The government efforts did not just start now. As of the mid 1990s, the Shanghai government has been adjusting policies in the light of the different circumstances in the local property market and new problems arising at different periods of time. The directions, intensity and focuses of the adjustment policies are based on different situations. Market adjustment for the city's real estate market did not start now nor will it end now.

Phoenix TV:  The central and Shanghai governments have recently introduced a series of housing policies.  In response, are there changes in Shanghai's housing market?  And will more policies come out?

Jiao Yang: We need the public's attention, analyses and judgments for the changes to the housing market.  Since it takes time for a series of polices to take effect, we need to make constant observations and conclusions.  Based on these observations and conclusions, we will make more adjustments.  Therefore, more new housing policies will come out at an appropriate time, based on studies to meet the city government's  "three-centered" housing control targets.

Dragon TV Shanghai: You mentioned just now that the municipality will ensure the supply of two properties for local residents, each one 10 million square meters.  However, the newly-begun constructions of middle- and low-priced houses, or the lands being developed for these houses, are too far from the downtown areas for local residents to enjoy their daily life.  So, what's the next approach the city will take to further improve housing security?  And, will the municipality implement any new policies to standardize the local real estate market?

Jiao Yang: As a matter of fact, the real estate market obeys its own values and rules.  The local municipality has developed an overall plan for developing property, paying close attention to all situations including the location of housing and transportation.

The improvement of the housing security system is quite a significant issue.  The municipality and the local government have established policies aimed at ordinary residents with middle- and low-income, who are the main foundation of our city. The policies intend to create better living and develop their environments, allowing them to enjoy the achievements of the reform.   People with living difficulties are always a top concern of the Party and the government.  This is not only the basis of government work, but also a comprehensive embodiment of the requirements for building a harmonious society and keeping social justice and equity.

The following four points are the main concerns to date for improving the housing security system:
1. To create a low-rent housing system.  With the help of the government's improved capability in housing security, the city will further expand the coverage of low-rent houses, so that by the end of 2005, over 18,000 families will benefit from this system.  This figure in 2004 was 13,500.  Thus, the basic living requirements for families with the lowest incomes can be met.  The level of the security allowance and the qualifications of the participants will be established adhering to the city's real economic development situation.
2. To build a new policy for housing leases.  Home lease is a way out that is as important as house purchase for troubled families.  The supply of two properties, each of 10 million square meters, promoted by the local municipality is aimed at those low- to mid-income families.   It's a concept of economical properties.  When perfecting the low-rent home system and the policy for house release, the governments at the city and district levels will promote some properties with favorable prices for the relocated suffering from financial troubles. 
3. To continue the favorable policy towards owners of publicly-owned housing.  For-sale publicly-owned homes are still available for lease with a low rent.  Qualified families with living difficulties can live in these houses with lower or zero rents.  More old properties are to be renovated to encourage their renters a chance to enjoy this favorable policy in the sale of publicly-owned houses.
4. To speed up the renovation pace for old properties.  The city will put more effort into the comprehensive renovations of some old residential areas and will increase the re-construction of flat roofs to sloped ones to improve residents' living environment and quality.  By 2005, 40 residential areas will take on a new look with sloped roofs and 8,000,000 to 10,000,000 square-meter of houses will be renovated.

In a word, the related local administrations will further detail and perfect the housing security system to improve the living environment and quality of life for the local people in a real way.

As for standardizing the local real estate market, the municipal government is always studying its healthy and balanced development.  In recent years, the administrations of local real estate have been continuously increasing both its supervision of property trades, and its management of the market.

First, we will regulate property investment and curb speculative buying in the housing market. While persevering in adopting market friendly policies, we will take all kinds of measures (including new rules and laws, financial and taxation policies, and administrative action) to regulate and guide the property market. Secondly, we will further improve the information system for tracking housing deals. Meanwhile, we will urge property developers and real estate brokers to be honest in conducting housing sales. Anyone caught producing artificial home sale contracts or inflating property prices will be severely punished.
Third, the online transaction system which provides information about developer projects for sale (including the number of available apartments, their prices and locations) will be further improved. We will provide better service, optimize the handling of affairs and promote operational efficiency. Fourth, we will make more information available to local residents besides improving the information system of the local property market. Housing information should be classified according to location and prices. Local residents should be given information about apartments for low- and medium-income residents, and homes for families relocated by urban renewal projects. Fifth, stricter supervision and regulation will be exercised over housing sales, especially the sales of houses still under construction. Malfeasance in housing sales will be detected and curbed in time. The government will keep a close watch on important residential projects. A work group will be formed to supervise the market order of housing sales and impose penalties on illegal practices in accordance with law.     

The reporter has just asked how we will punish those who have violated market order. I will explain it in detail now. In order to regulate the local property market, the Shanghai Housing and Land Administrative Bureau have recently launched a campaign against illegal practices in housing sales (e.g. The cancellation rates of home sale contracts are relatively high in some high-end residential projects; Property developers are accused of seeking to corner the market by executing bogus home sale contracts; Property developers and estate brokers are colluding with each other to drive up housing prices). The measures taken by the bureau include stricter supervision over the withdrawal of home sale contracts, more careful examination during the issuance process of presale permits, stricter supervision over the agencies where housing departments are on sale, and heavier penalties for malfeasance.  

Three local developers were punished for malfeasance last year. Since March 1 this year, the bureau has paid more attention to cracking down on bogus home sales contracts and other illegal practices. Seven residential projects have been ordered to suspend operations this year. The bureau has conducted investigations into the top three residential projects that have the highest withdrawal rates of home sale contracts. In a word, under no circumstance will the municipal government be indulgent towards illegal practices (e.g. contract fraud, cornering the market, inflating housing prices, violating market order). Anyone who is caught cheating in housing sales will be punished. This is the government's attitude towards the issue.