A new wave of real estate development has hit Shanghai, spurred by the central government's new emphasis on housing as its economic growth engine. In the past few months, the city has drawn up a series of new policies aimed at increasing investment and revitalising its sluggish property market. The policies, which were piloted in the Pudong New Area last month, include allowing non-Shanghainese to acquire properties and cutting property-related fees to boost sales. Wang Xiaoguang , divisional vice-director at the Shanghai housing and land administration bureau, said the latest development reflected a change in Shanghai's investment strategy. 'Before, we used land to attract investments. Now we use properties,' he said. Non-Shanghainese buying properties in the city would be entitled to a 'blue card' - that is, a temporary residence permit. Transaction service fees would be reduced from 1 per cent of the selling price to 0.5 per cent, while those for low-cost flats would remain at 0.08 per cent. Pudong, Changning district in Puxi and Qingpu county were designated early last month as test areas for the new regulations. Pudong officials said the response, mainly from investors from nearby Zhejiang and Jiangsu provinces, was positive. To date, 382 non-Shanghai households had registered to buy properties. Investors must buy a flat worth 400,000 yuan (about HK$372,200) and with at least 861 square feet of floor space to qualify for residence in Pudong. The official vacancy rate for residential and office space in Pudong is 30 per cent but property consultants put the figure at 80 per cent. Pudong was reported to have released eight million sq ft of residential space and 2.4 million sq ft of office space for sale this year. Official figures showed that the city had 24.9 million sq ft of housing stock. Over the past five years, Shanghai has sold 215.3 million sq ft of housing and completed about 1,500 high-rises. The city has begun to see the results of its over-building in 1992 and 1993 as completed new properties hit the market. In the first half of this year, buildings with a total of 30.2 million sq ft of space were completed. Domestic demand from Shanghai residents for flats is huge but many are unable to pay high asking prices. Many prefer to rent state-owned flats which cost an average of only 0.11 yuan per sq ft. The price of a two-bedroom flat in the city environs is about 700,000 yuan. But the government is increasing rents in a bid to raise interest in buying. Since 1995, rents have soared 50 per cent and the trend is expected to continue. Of the total number of flats available for domestic sales last year, 34.3 per cent were bought by individuals, a jump from 12 per cent in 1990. Xie Jiajin , the director-general of the Ministry of Construction's real estate industry department, said Shanghai had been a leader in moving its real estate market ahead. Shanghai started its housing reforms in 1991 and established a pioneering housing fund which now stands at 6.35 billion yuan. Workers who have invested in the fund can draw on it to buy flats. They can use the money to purchase low-cost flats or government-owned apartments. Despite the measures, housing shortages are still common because Shanghai wants to raise the per-capita living space to 100 sq ft from 86 sq ft.