© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
November 30, 2012 7:06 pm
Shanghai’s skyline is a constant reminder of the city’s rising status. Groundbreakings for office towers seem to occur every day and the demand for upscale apartments, while lower this year, is anticipated to continue its long-term upward trend.
But not everyone in Shanghai wants to live on the 30th floor or move to the distant suburbs of Pudong, regardless of the amenities that accompany the city’s more rarefied living spaces.
Founded in 1849, the former French Concession was returned to Chinese control in 1946. Despite its name, the area was home to merchants of many nationalities as well as a large Chinese population, including dignitaries such as Sun Yat-sen, considered the “father” of modern day China. Thought of as the most desirable place to live in Shanghai during the international settlement era, it continues to exert an almost otherworldly allure.
“It’s quiet, the homes and apartments are historical, the streets are lined with trees, and there are many cafés,” says Daniel Kao, manager of Deko Property Consultancy.
The myriad international influences are preserved in the local architecture, with art deco apartment blocks abutting Tudor-style mansions, Spanish villas and Chinese vernacular homes. Many are hidden in lanes but the most substantial homes usually overlook major streets that are reminiscent of northern European cities.
What burnishes the district’s charm is its location: centred in Puxi, not too far from the Bund, and close to major shopping streets such as Nanjing Lu.
Michael Ding, owner of Red Dragon Property, says three groups have spurred the area’s revival: overseas Chinese, expatriates and, increasingly, local Chinese buyers. “Until 2006 there were lots of overseas Chinese buyers from Hong Kong, Taiwan and the US. But after 2006, you had to work in Shanghai for one year before you could buy,” he says.
A more recent central bank dictat that buyers put down a 40 per cent deposit on their first home, and more on a second, has further cooled the market, as have higher interest rates and limits on the number of properties foreigners and Chinese can own. One result, says Kao, is that the Rmb20-Rmb30m (£2m-£3m) market is the most active.
Even so, Ding estimates that values in the former French Concession have doubled in the past five years. Buyers who purchased in the early 2000s have fared even better, with exceptional properties experiencing an eight-fold increase in value.
Despite talk of a property bubble, the former French Concession may be protected by the limited supply of family homes, the number of which Ding estimates at just a few hundred. In addition, newly wealthy Chinese are entering the market.
“More and more local Chinese want to buy around here. Some were told that old houses made better investments than modern homes. Other people have studied the arts and appreciate the architecture. Some have family who lived here before 1949 and want to return,” he says.
Ding adds that a growing number of newcomers are cash buyers – often entrepreneurs from the nearby provinces of Zhejiang and Jiangsu – who are not necessarily interested in living in their properties. “Some people buy so that they can tell their friends they have a home in the former French Concession, but they will stay in a villa in Hongqiao.”
Arguably, though, it’s foreigners for whom the former French Concession’s architecture has the most cultural resonance. And those who buy often do so because they expect to be in Shanghai for a long time.
“It’s in the centre of town but still very local. Sometimes you feel like you are walking around Primrose Hill or another London village,” says Chitra Hepburn, a Swiss citizen who bought a villa in 2002. Hepburn relishes her home’s western origins – it’s one of several houses built by British Gas in the 1930s – but has also enjoyed watching her children grow up playing with children of Chinese neighbours.
Beyond the lifestyle benefits, some buyers have spotted potential long-term advantages. “In 2001 we were walking around the Fuxing West Road area where the density is very low, and my husband, a New Yorker, said that these would be the brownstones of Shanghai,” says Canadian Joanna Cappo. “We immediately sold our stock in the US and started bidding on houses.”
Two years later, the Cappos bought a 400 sq metre Spanish-style villa and have lived in it since. Other owners, however, have moved out to benefit from the robust rental market.
Modernised family homes rent for Rmb30,000-Rmb80,000 per month, often to foreign consulates or to senior executives. Cappo says that for French people in particular, “living in the former French Concession has almost become a rite of passage”.
Those who want to live here permanently need considerable resources. Despite the top of the market having slowed, Kao is about to list a French-style four-bedroom house, on a 700 sq metre plot on Yanqing Lu, for Rmb80.5m.
Ding’s offerings include a Rmb55m house with a substantial garden on a lane off Huashan Lu. He is also marketing a refurbished four-bedroom lane house near Yan’an Park for Rmb22.8m.
Buyers with more limited budgets still have plenty of choice. Smaller lane homes can still be acquired for about Rmb14m, and remodelled two-bedroom apartments in art deco buildings sell for Rmb8-Rmb10m and up.
Although some potential buyers may be turned off by the opacity of Chinese law and the changing nature of property rights, others, especially those who live in homes deemed architecturally significant by the Shanghai city government, have found help in unlikely places.
“We can’t touch the façade of the home, but the government has gone to great lengths to maintain how it looks. They redo the roofing as well as painting the house every three to four years,” says Hepburn. “We do our part and keep the surroundings pristine – it’s our little contribution to the neighbourhood we love.”
● Foreigners need proof of one year’s residency to buy a home
● Buyers pay taxes of 3 per cent on homes with values over Rmb3m
● Sellers of homes owned for more than five years pay 7.65 per cent tax
● Downpayment requirements fluctuate due to policy changes
● Violent crime is low compared with large western cities
● Subtropical climate with intense humidity and temperatures of 35°C in summer. Winters are damp and cold
What you can buy for ...
£500,000 A very small apartment
£1m A tiny lane house or a two or three-bedroom apartment
£5m A substantial four-bedroom house with garden
Please don't cut articles from FT.com and redistribute by email or post to the web.