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Elaine Chan

THE missing link between the demand for housing by people in Shanghai and their ability to purchase their own flats is mortgage financing, according to a report by property consultancy, Brooke Hillier Parker, Shanghai.

  The People's Bank of China is encouraging Chinese banks to offer mortgage financing but the infant Chinese mortgage industry is proving to be unequal to its role.

  The report said the key to the success of mortgage financing was to arrange mortgages for buyers so that monthly repayments fell within the family budget.

  City officials said banks were willing to provide mortgages as individual purchases now outstrip buying by enterprises.

  Shanghai banks provide flat buyers with mortgages worth between 75 and 80 per cent of the selling price of the property after valuation.

  Repayment periods vary from eight to 15 years.

  The report said spending on homes by residents was expected to account for a higher proportion of the family budget now the municipal authorities had initiated housing reforms.

  Low rents charged under the current system have left the city short of funds for maintenance and construction of new buildings, and have resulted in a fall of per capita living space for Shanghai residents.

  The report said the government intended to raise rents and encourage owner occupation by offering occupants of housing owned by state enterprises the opportunity to buy at reduced prices.

  Rents for those who do not buy will rise substantially and are expected to account for about 20 per cent of the tenant's monthly income instead of about one per cent at present.

  Residents may also be offered new state housing at about 92.94 yuan (about HK$86.43) per square foot - between a quarter and a third of the market price.

  The aim of these plans is to relieve the work units and the state from the burden of providing housing. Meanwhile, tenants are becoming more flexible on location.

  The company said Shanghai completed 94.7 million sq ft of housing last year. Of this, 57 million sq ft was for low-cost housing.

  The Shanghai municipal government has set a per capita living space target of 107.6 sq ft by 2000.

  To achieve this, the city will need to complete an estimated 860.8 sq ft of housing space in the next five years, at a cost of 100 billion yuan.

  Officials are promoting foreign investment in order to meet the target.

  With the downturn of the Shanghai property market, more foreign and local developers are looking at developing domestic housing despite relatively low yields of between 10 and 15 per cent.

  Meanwhile, another report by Richard Ellis concluded that rentals for better quality accommodation in popular districts continued to climb steadily over the late 1994 levels.

  Current stock amounted to 6,600 units including villas and apartments. Jingan district is the most sought after. Rents ranged from the equivalent of HK$14.4 per sq ft to $19.43 per sq ft, the report said.



Mortgage lag caps market in Shanghai homes