Shanghai Commercial Real Estate Market Is there a Bubble under Prosperity - Essay Example

However, demand has driven the price of properties up at an alarming rate, due mainly to speculative property purchases and "hoarding" practices of real estate developers. Fears of an impending bubble situation has driven the central government to implement regulations and restrictions designed to cool what is considered an overheated real estate market in 2005. Studies on the effects of these intervention measures show that while lower end residential markets have experienced price decreases, the commercial and high-end development projects have actually posted price increases even with the regulations in effect.

Studies also indicate that while the upward spiral of property prices must be scrutinized and monitored regularly, Shanghai's real estate has not been overvalued and is therefore yet to be considered in a state of a real estate bubble. To be "shanghaied" is to be tricked, as a reference to historical government corruption and tolerance of the then-ruling Nationalists for opium dens and prostitution in the early part of the 20th Century. As a reaction to this corruption, the Communist Party was founded in Shanghai, a nationwide attempt to bring order into chaos.

Incidentally, Mao's Cultural Revolution and Deng Xiaoping's capitalist policies likewise saw its inception in Shanghai. (Areddy 2007) It seems ironic that the apparent seat of communism and capitalism in China should be in the same city, and yet Shanghai has always been grandiose in all its associations, despite its size. Shanghai is less than 1% of the total land mass of China at 6,340.5 square kilometers in 2005 and about 1% of the total population at