Shanghai has given a clear signal that it will let the local property market boom as long as it contributes to economic growth and tax revenue. Statistical bureau chief Pan Jianxin said last week that no bubble exists in the market and city officials saw no reason for worry.
The debate over the state of China's property market started last year, when Premier Zhu Rongji expressed concern. The central bank then cracked down on banks offering cheap home loans.
Some cities have started collecting land appreciation tax, but not Shanghai. In fact, the city offers an income tax break for home buyers, although that policy is likely to lapse in May.
Mr Pan said demand was coming from rising incomes, foreign companies drawn to the mainland after its entry to the World Trade Organisation, and people from other provinces flocking to Shanghai. Property values have also been pushed up by Universal Studios' planned theme park, the possibility of a Disney park and the hosting of the World Expo in 2010.
But the boom has caused some residents to complain that housing is becoming unaffordable. Much of Shanghai's housing dates from before 1949, and many people are eager to move into new homes.
Even if Shanghai's property market is not a bubble, analysts say it is showing some signs of froth.
