Housing prices in Zhabei district in Shanghai have become one hot topic of discussion after the municipal government suggested it might merge Zhabei with neighboring Jing'an district. Much of the discussion has focused on the possibility of a surge in housing prices in Zhabei. Although there has been some anecdotal evidence of buyers rushing to purchase property in Zhabei before the merger, many real estate agents in the district don't expect the prices will surge in the long term.

The junction area of Jing'an and Zhabei districts, in Shanghai, on September 11. Photo: CFP

Yu Binghuan had a good week. The real estate agency manager, who works for Shanghai Centaline Property Consultants, in Zhabei district, sold five homes last week.

In the recent past, Yu was lucky to sell two in one week.

"I've been getting a lot more calls from clients recently, and they've been making their decisions a lot faster," Yu told the Global Times on ­Thursday.

Yu attributed the sudden interest in Zhabei real estate to the municipal government's announcement that suggested the district might be united with Jing'an district, the city's smallest and most expensive place.

The Shanghai municipal government's official Weibo account said on September 7 that the government would be accepting public comment on the idea of merging Zhabei district into Jing'an district.

The announcement sparked a lot of speculation, specifically on the prospects of Zhabei's housing prices going up.

According to a recent survey on fang.com, a real estate data provider, 60 percent of respondents said the merger would cause housing prices to rise in Zhabei district.

However, local real estate agents don't share their optimism. They said the district's comparatively old housing stock and lack of surrounding amenities make a surge in housing prices unlikely.

Behind the optimism

There is one thing shared by people who have recently decided to buy a home in Zhabei, said Lu Furong, a real estates agent at fang.com. They all believe prices are set to take off.

"They all think housing prices in Zhabei will follow those in Jing'an," Lu said.

There's pretty simple logic behind the belief that housing prices in Zhabei will rise if the district merges with Jing'an.

It goes like this: If Zhabei shares the same name as Jing'an, its homes will fetch similar prices.

Homes do cost a lot more in Jing'an than in Zhabei. The average price of Jing'an home is 91,009 yuan ($14,279) per square meter, the National Business Daily reported on Thursday, citing data from a Shanghai-based research institute.

By comparison, the average price of a home in the most expensive area of Zhabei is 69,426 yuan per square meter, and only 42,200 yuan per square meter the district least expensive area.

"My clients believe Jing'an should have higher housing prices due to its convenient location and prosperous businesses," Lu said. "Buyers believe Zhabei will see similar benefits once it merges with Jing'an."

Zhang Xiaofeng is now selling his house in Zhabei. He said that many sellers have raised their prices by 10 percent to 15 percent recently.

Some have taken their properties off the market in anticipation of even higher prices in the future.

"It is understandable that sellers expect higher prices and want to take advantage of every piece of favorable information to push prices higher," Zhang told the Global Times on Sunday. "The merger is definitely good news."

Pessimistic predictions

Although Yu, the manager at Centaline Property, has seen housing prices rise in Zhabei, he doesn't believe prices will go up in the long term. "The government policy might have a momentary stimulus effect that improves residents' expectations for housing prices," Yu said. "But these expectations and prices will level off as time goes on."

Zhabei has some definite disadvantages compared with Jing'an. "Zhabei district's remote location and the old age of its homes make it impossible for prices in Zhabei to rise to the same level as in Jing'an district," said Song Xiaoxiao, a manager at the Shanghai branch of Shenzhen Cloud Housing Network Technology Co, a real estate consultancy.

A large proportion of Zhabei's homes are old public housing that were built by the government, State-owned enterprises and government-affiliated institutions before 1998 - when the central government launched reforms to the national housing system. The reforms included abolishing the public housing distribution system and the creation of a private housing market.

This kind of public housing was inferior to the housing built after the reforms in many respects.

"Uncomfortable housing conditions and the unfavorable surroundings don't make it the best choice for people to choose Zhabei as a place to live," Song told the Global Times on Thursday. 

Song has been working as a real estate agent in Zhabei for about five years. "Based on my experience, there won't be a surge in home prices in Zhabei after the merger with Jing'an district," she said.

Zhou Ling, a real estate agent at Shanghai Lehua Real estate Investment Consulting Co, has seen home sales rise somewhat at her company recently, but she also stressed that September and October have traditionally been hot months for real estate. "The merger may boost sales to some extent, but it won't be obvious," she told the Global Times on Wednesday.

Chen Bohua, a channel manager of the sales and marketing department at Beijing-based Franshion Properties (China), was also skeptical about a rise in home prices in Zhabei. "There are no fundamental reasons to justify a price surge here," Chen told the Global Times on Wednesday,

Even with a merger, the houses will be the same. The streets will be the same. Residents will still have to walk the same distance to the bus stop. "The merger won't change the realities of people's everyday lives," Chen said.

Franshion Properties is now advance booking its third batch of new commercial property in a downtown area of Zhabei. "We haven't raised our booking price, and we don't think it is reasonable for property developers to use the merger to justify raising their prices," Chen noted.

As for people who have hotly talked about school district houses, Chen insisted that they will not have much of an impact.

Both Chen and Song believe that only more favorable government policies can truly push up housing prices in Zhabei. "A merger won't accomplish this on its own," Song said.

Newspaper headline: Unreal expectations