Shanghai revised redemption standards for urban relocation at the end of last month, increasing the minimum reparation fees to residents in all districts. The move came in response to continuously surging housing prices, according to the Shanghai Housing and Land Administrative Bureau.

Compensation in the Class-A region in Jing’an District, which features high-end office buildings, is the highest in the city at no less than 7,700 yuan (US$928) per square meter, up 67 percent from a year earlier.

Compensation in Pudong New Area’s Class-A region, which includes the site of World Expo 2010, jumped to at least 5,700 yuan per square meter, a 36 percent increase from a year earlier. Average compensation rises in the city’s downtown areas range from 2,000 yuan to 3,000 yuan per square meter, according to the bureau.

The change will put pressure on property developers, as they will need to spend more on relocating residents.

“The rules will probably drive some small players out of the market as the costs of relocation are expected to jump,” said Yang Zijiang, real estate research director with Fortunite Consulting Company. “Large developers may also have to debate increasing housing prices, since they have already been high for a prolonged period.”

Although reparation fees have jumped significantly, several residents are dissatisfied with increases that were lower than expected.

“The compensation fee is not high compared to soaring housing prices nowadays,” said Qian Guohua, a resident of Zhabei District. Qian also said that most houses to be demolished are small, so the fee isn’t enough to cover buying the larger new apartments.

Shanghai’s average new housing price hit 5,381 yuan per square meter in May, the highest on the mainland. Analysts believe prices are likely to remain high as demand remains fundamentally strong.

(eastday.com July 23, 2004)