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The new market for old properties If an Englishman's home is his castle, then we must be taking afternoon tea on the ramparts. Dennis, our Englishman, pours us a cup of Earl Grey on the raised porch overlooking his little garden as the sun begins its descent, and the conversation turns to real estate.
But in the calm and civility of Dennis's garden, issues such as resale value and market fluctuations seem out of place. This is a home, a place to live and relax, somewhere to seek refuge from the daily grind. Built in the late 1920s, in a peaceful lane just off Yuyuan Lu, Dennis's house exudes the settled feeling of a building that has had time to put down roots. "We were looking for somewhere with character," says Dennis, thinking back to when he and his wife first began their search for a Shanghai home. "This was a luxury residential complex for foreigners when it was built. The lanes are more spacious than your average lane house. The gardens are bigger. It seemed just right." Shanghai's residents are turning on to old properties like never before. If the 1990s were all about office space and tower-block one-upmanship, the 2000s are about turning to the past for inspiration. But with prices for old properties in Shanghai increasing quicker than any other sector - plus the hassle of dealing with costly renovations, power cuts and rising damp - is buying an old house worth the bother?
Old houses are not a new fad. "I want a house that has got over all its troubles; I don't want to spend the rest of my life bringing up a young and inexperienced house," wrote author Jerome K Jerome in 1909. Aged houses have one distinct advantage over their more youthful counterparts: they have proved their mettle. A building that has survived 60 or 70 years of political and cultural upheaval stands a good chance of making it through to the end of the 21st century and beyond. Compare that with many of Shanghai's newer edifices, which look outdated and flimsy within a decade. "Honestly, when I walk into a new place, I don't understand the style. I don't know where to start," admits Steve, a young American who has lived in Shanghai for four years. "With an older apartment, I feel like I know what I'm doing. I try not to change the structure of the place - I try to keep it as much as possible like the original. It was designed this way for a reason." Eighteen months ago, Steve bought his first apartment - a large space in the old French Concession close to Fuxing Park - with the help of a loan from his parents. After a year spent decorating and living only in the finished rooms, Steve sold his apartment for a tidy profit and bought two more. "The whole point of selling that first place was to buy the next places," he remembers with a smile. He also changed his job. He now works, appropriately enough, in real estate. This is Steve's third property in Shanghai: a modest second floor apartment on Taiyuan Lu that looks like the perfect bachelor pad. With its tasteful mix of modern and Qing styles, it is a highly desirable residence in a city where older properties are running out. It may have been only two years since Steve got into the real estate business, but he makes it sound like ancient history. When you consider how prices have changed since 2002, he has a point. "I know people who started looking for a place six months ago when the average price of a downtown apartment was around 13 or 14,000 yuan a square metre. They hesitated to buy because just six months before prices were under 10,000. Now, if you saw something in the French Concession for under 20,000, I'd say go for it." Steve's first apartment was only the third place he looked at. Making a quick decision and working to a bottom line, rather than arguing over every yuan, are still central to his buying philosophy. "You can sit there and haggle over 50,000 yuan. But you could end up losing the place. By the time you find another one you like, the price will have risen anyway."
Confidence is the key to snapping up older properties. But even the most seasoned buyers have their moments of doubt in this extraordinary market. In the late 80s, downtown Shanghai residencies averaged about RMB 400 a square metre. With prices now 50 times higher, there is increasing speculation that the proverbial bubble will burst soon.
There are other concerns, though. Foreigners have only been granted the right to purchase in the last three years, and there are issues still to resolve. Seventy-year leaseholds - rather than permanent freeholds - are still the norm here, with the government retaining ownership of the land on which apartments are built. Quite what will happen in 70 years' time is anybody's guess. What happens if the local council decides to widen the road and lop off the front of your newly decorated dream house? And what about surveyors? Those dark patches on the bathroom ceiling may one day decide to join you in the shower if you don't have them checked out now.
Barrack admits the concerns are natural, but says that the situation is improving. "You don't just put down money on a place you don't know anything about these days. Anyone working through a good agent will make an offer letter that includes a number of conditions - a survey, for example, an ownership check, another check to see if the city plans to demolish the area. These things can all be arranged." In spite of the dangers, more and more foreigners and locals are putting aside their fears and putting their money on the table. "When we started out two years ago, we would get about one enquiry a week from someone looking to buy an old property," says Barrack. "Now, we are up to about fifteen a day. "For a foreigner living in Shanghai, these older properties are a reminder of home," he continues. "A lot of Westerners grew up in houses that look like this. Higher ceilings, a feeling of space, quiet lanes?- these are familiar characteristics for many of them." Tess Johnston, an expert on Shanghai's older properties who has written many books on the subject, sums up the appeal slightly differently: "These houses represent the mystique of the city's past. There are so many styles - Spanish colonial, Art Deco and so on. The story of each building and its history resonates with people."
Ironically, as foreigners move into Shanghai's European-style lane houses and away from the "safer", managed expat housing of Pudong and Hongqiao, they find themselves in the middle of local communities unused to having foreigners as neighbours. Even experienced China hands like Dennis can trip up in the minefield of local community relations. "Just after we finished our renovation, the neighbourhood committee decided the whole neighbourhood needed doing up. They started painting the other houses - one day a builder turned up to paint our house the regulation cream. "We said thanks but we have just had the place painted. But the committee turned up and told us we had to repaint. We eventually persuaded them to leave us a different colour. And then one day we got back to find our mailbox had been painted over. It's a new concept for everyone here that someone might have a different opinion about decor." With the mailbox scraped back to its natural wood finish, and the house behind us still defying the regulation cream, it's easy to see the appeal of Shanghai's older homes. In a sea of fast-paced uniform modernity, they represent a victory for the little pleasures in life, like being different and taking your time. Down a quiet lane, soaking up the late afternoon sun with a cup of tea in hand, it all makes perfect sense.
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Talking about houses is rather like talking about babies: endlessly
fascinating if you happen to have one; mind-numbingly dull if you don't. And
yet, in the past two years or so, property prattle has been de rigueur among
Shanghai residents. If it's not price per square metre, it's real wood floorings
and under-floor heating. As real estate prices go through the roof, the city is
reading up on roofing. Everyone's suddenly an expert.
But Scott Barrack, who runs Space Properties, specialising in older
residences, is convinced the market still has room to grow. "In Shanghai, people
don't have access to mountains and beaches," he explains. "The only sanctuary
you have in this city is your home. So properties here are more expensive and
good places hold and increase their value."
