URBAN VIEW -1-

Contents:

2017 Issue No. 3

02 Data & Views

Macro Economy

Urban Data - Shanghai Inventory

Residential Price Index

Urban Analysis - Real Estate Market

Costs of Building Materials &

Construction

23 Industry Focus

Targeted Increase of Loan Rate Begins

27 In-Depth Observation

Study On Quantitative Analysis of The

Ecological Benefits from Land

Reclamation in Suburbs of Metropolis

39 News Guidance

Policy & Regulation

Real Estate Finance

Market Highlights

Hosted by: Urban Surveyors -

Shanghai Urban Real Estate

Appraisal Co., Ltd. (SUREA)

Chief Editors: Yuan Donghua,

Wang Changhua

Deputy Editors-in-Chief: He Jian,

Zhu Yu

Executive Editor: Qin Yun

Associate Editors: Shao Minghao,

Huang Haisheng, Jiang Qimin, Lin

Feng

Editors: Lin Jingjun, Ren

Chenying, Shi Jian, Mi Huiying

Art Editor: Zhang Tao

Address: 11F & 15-18F New

Golden Bridge Plaza, No. 1 West

Beijing Road, Shanghai

Postcode: 200003

Website: www.surea.com

Email: surea@surea.com

Tel: 86 21 63589988

URBAN VIEW URBAN VIEW -2-

Macro Economy

Trend of

Growth of Shanghai

CPI (Apr)

Category YoY

CPI

Food, tobacco and liquor

Clothing

Residence

Living articles and services

Transportation and

communication

Education, culture and

recreation

Health care

Other articles and services

URBAN VIEW

Trend of CPI & PPI, Jan 2015~Apr 2017

Shanghai Real Estate Loans, Jan 2015~Mar 2017

YoY % MoM %

0.1 1.2

-1.8 -0.3

1.3 0.2

2.4 0.1

0.8 0.2

1.8 -0.2

2.6 0.4

5.7 0.7

3.4 0.7

PPI (Apr)

Category YoY

PPI -0.4

Means of production -0.6

Mining industry -1.2

Material industry -0.8

Process industry -0.4

Means of livelihood -0.1

Food -0.2

Clothing 0.0

General articles for daily

use

-0.1

Durable consumer goods 0.1

URBAN VIEW -3-

7

YoY % MoM %

0.4 6.4

0.6 8.4

1.2 28.3

0.8 13.0

0.4 5.2

0.1 0.7

0.2 0.5

0.0 1.5

0.1 1.4

0.1 -0.1

URBAN VIEW -4-

Urban Data

- Shanghai Inventory Residential Price Index

1. The large transaction volume drove the index up. Credit and loan policies

may be further tightened.

The significant rebound of

transaction volume greatly

encouraged the landlords,

which drove the index up by

2.08%.

At the beginning of May,

many banks of Beijing have promulgated new requirement for the loan rate of home

mortgage. And some banks have already reduced the concession of loan rate for first

home buyers. With the rebound of the transaction volume of inventory homes, further

tightening of the credit and loan policy in Shanghai cannot be ruled out if the

government tries to stabilize the home price.

Shanghai Inventory Residential Price Index was 308.87 in April 2017, rising by 2.08% MoM and growing by 36.78% YoY.

The city’s index increase over the past three months

Month Index MoM Increase

2017. 2 297.07 1.66%

2017. 3 302.57 1.85%

2017. 4 308.87 2.08%

URBAN VIEW -5-

2. Price index beyond the Suburban Ring Road saw consecutive growth, and

price index within the Inner Ring Road saw the smallest increase.

The price index beyond

the Suburban Ring

Road saw an increase

of 3.36%, and the price

index within the Inner

Ring Road saw a

growth of 1.59%.

3. Exurban sections saw further increase and Chongming Section saw the

largest growth.

In April 2017, most exurban sections saw further increase in price index; Chongming

Section saw an increase of 5.30%, the largest one in this month.

Between OR and SR313.43 2.11%

Within IR 300.66 1.59%

Between IR and MR 319.21 1.88%

Between MR and OR 320.26 1.96%

Outside SR 269.92 3.36%

URBAN VIEW -6-

Urban Analysis——Land Market

1. Supply

1) Overall Supply

The supply volume of business-oriented land showed structural decline in April.

There were only 22.2 hectares supplied, down 51.22% MoM. By contrast, there were

15.5 hectares of industrial land listed, creating a record high since the beginning of the

year.

2) Supply of Business-oriented Land by Type

By type, only retail/office land and affordable housing land were listed on market in

April. There were 17.3 hectares of retail/office land supplied and merely 4.9 hectares

of affordable housing land supplied.

0

20

40

60

80

100

120

140

160

180

16/04 16/05 16/06 16/07 16/08 16/09 16/10 16/11 16/12 17/01 17/02 17/03 17/04ha.

Trend of Land Supply

Business-oriented land Industrial land

0

20

40

60

80

100

120

16/04 16/05 16/06 16/07 16/08 16/09 16/10 16/11 16/12 17/01 17/02 17/03 17/04ha.

Supply of Business-oriented Land by Type

Commodity residential land Retail/office land

Affordable housing land Mixed-use land (incl. residential use)

URBAN VIEW -7-

2. Transaction Volume

1) Overall Transaction Volume

The overall shrinkage of supply led to the decline of transaction of business-oriented

land in April. Only 17.3 hectares were traded, down 32.4% MoM. The transaction

volume of industrial land rebounded to 16.2 hectares in April, seeing significant

increase on both monthly basis and yearly basis.

2) Transaction Volume of Business-oriented Land by Type

By type, only retail/office land was transacted in April. The transaction area totaled

17.3 hectares, including 3 parcels located in Pudong, Xuhui and Qingpu, respectively.

0

20

40

60

80

100

120

140

160

180

16/04 16/05 16/06 16/07 16/08 16/09 16/10 16/11 16/12 17/01 17/02 17/03 17/04ha.

Trend of Land Transaction Volume

Business-oriented land Industrial land

0

10

20

30

40

50

60

70

80

90

100

16/04 16/05 16/06 16/07 16/08 16/09 16/10 16/11 16/12 17/01 17/02 17/03 17/04ha.

Transaction Volume of Business-oriented Land by Type

Commodity residential land Retail/office land

Affordable housing land Mixed-use land (incl. residential use)

URBAN VIEW -8-

3. Transaction Price

In April 2017, the average transaction price of business-oriented land increased to

RMB 17409/sqm, down 39.8% MoM. The average transaction price of industrial land

saw a further decrease to RMB 1082/sqm without the support of parcels in central

areas and parcels for R&D and design purpose.

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

16/04 16/05 16/06 16/07 16/08 16/09 16/10 16/11 16/12 17/01 17/02 17/03 17/04RMB/sqm

Average Transaction Price of Business-oriented Land

Business-oriented land Commodity residential land

Retail/office land Mixed-use land (incl. residential use)

0

500

1000

1500

2000

2500

16/04 16/05 16/06 16/07 16/08 16/09 16/10 16/11 16/12 17/01 17/02 17/03 17/04RMB/sqm

Average Transaction Price of Industrial Land

Industrial land

URBAN VIEW -9-

Urban Analysis——New Residential Market

1. Supply and Demand, Transaction Volume and Price

In April 2017, the city’s new commodity residential supply totaled 560900 sqm, a

MoM growth of 42.98% and a YoY decrease of 57.25%; the transaction area totaled

671900 sqm, down 9.44% MoM and 30.85% YoY. The supply-demand ratio

rebounded to 0.83. The transaction prices averaged RMB 47,682/sqm, dropping by

0.69% MoM and rising by 45.71% YoY.

0.00

50.00

100.00

150.00

200.00

250.00

16-4 16-5 16-6 16-7 16-8 16-9 16-10 16-11 16-12 17-1 17-2 17-3 17-4

sqmMonthly Supply & Demand for Commodity Housing

Supply area Transaction area

x 1

00

00

-15.00

-5.00

5.00

15.00

25.00

35.00

45.00

55.00

20,000

25,000

30,000

35,000

40,000

45,000

50,000

16-4 16-5 16-6 16-7 16-8 16-9 16-10 16-11 16-12 17-1 17-2 17-3 17-4

%RMB/sqm Average Transaction Price of Commodity Housing

MoM YoY Average transaction price

URBAN VIEW -10-

2. Hot Sections

Top 10 sections in terms of commodity residential transaction volume across the city in April 2017

Rank Section Supply Area

(sqm)

Transaction

Area

(sqm)

Average Transaction

Price

(RMB/sqm)

Turnover

(in RMB 100

million)

1 Lingang New Town 60,700 51,049 25,034 12.78

2 Sijing - 45,902 47,851 21.96

3 Jiading New Town 23,429 38,950 36,089 14.06

4 Huinan - 30,605 30,169 9.23

5 Haiwan 31,588 29,933 18,861 5.65

6 Nanxiang 37,560 26,765 50,674 13.56

7 Gaoqiao, Gaohang 34,654 24,106 54,963 13.25

8 Qilian 44,894 23,617 51,519 12.17

9 Xujing - 22,776 57,027 12.99

10 Zhaoxiang 33,300 21,064 44,642 9.40

Top 10 projects in terms of commodity residential transaction volume across the city in April 2017

Rank Project Name District Section

Transaction

Area

(sqm)

Average

Transaction

Price

(RMB/sqm)

1 Lush Land Songjiang Sijing 27,659 53,726

2 Greentown Sincere Garden Fengxian Haiwan 25,628 18,015

3 Sunland Residence Pudong Gaoqiao, Gaohang 23,018 55,489

4 Shanghai Western Center Jiading Nanxiang 22,915 50,659

5 Godsend Villa Jiading Jiading New Town 20,584 35,219

6 Capitaland New Horizon Nanhui Lingang New Town 18,193 19,977

7 La Mirage Nanhui Huinan 14,854 26,878

8 Wonderful World Town Pudong Huamu, Beicai 13,603 67,333

9 Greenland Nine Warm Home Songjiang Sijing 11,116 42,007

10 Ocean Seasons Nanhui Huinan 11,105 33,330

URBAN VIEW -11-

3. Hot New Supply

Top 10 projects in terms of new commodity residential supply across the city in April 2017

Rank Project Name District Section

New Supply

Area

(sqm)

1 Residence Elite Baoshan Qilian 44,894

2 Rui Hong Xin Cheng Hongkou Sichuan Rd. (N.), Siping Rd. 44,496

3 Yanlord on The Park Pudong Century Park 43,216

4 Shanghai Western Center Jiading Nanxiang 37,560

5 Central Garden Putuo Yichuan 35,878

6 Sunland Residence Pudong Gaoqiao, Gaohang 34,654

7 Splendid Villa Qingpu Zhaoxiang 33,300

8 Tagen Garden Nanhui Lingang New Town 32,537

9 Greentown Sincere Garden Fengxian Haiwan 31,588

10 Zhonghuan International City Baoshan Gongfu, Gongkang 31,532

4. Transaction Structure

By total price, in April, the proportions of properties priced RMB 2-3 million fell by

6.08 percentage points; while the proportions of properties priced over RMB 3 million

below 1m0%

100~1501% 150~200

7%

200~30018%

300~40018%

400~50016%

above 5m40%

Transaction Structure of Commodity Housing by Total Price, Apr 2017

below 704%

70-9023%

90-14557%

145-2008%

200-3006%

above 3002%

Transaction Structure of Commodity Housing by Area, Apr 2017

below 1m0%

100~1501% 150~200

4%200~300

24%

300~40018%

400~50014%

above 5m39%

Transaction Structure of Commodity Housing by Total Price, Mar 2017

below 706%

70-9024%

90-14556%

145-2007%

200-3005%

above 3002%

Transaction Structure of Commodity Housing by Area, Mar 2017

m = million

URBAN VIEW -12-

increased.

By area, the proportions of properties larger than 90 sqm rose across the board. The

proportion of properties with an area of 90-145 sqm saw the largest growth, namely,

1.74 percentage points. By contrast, the proportions of properties smaller than 90 sqm

declined by 2.59 percentage points in total.

5. Inventory Change

As of end-April 2017, the city’s first-hand residential inventories totaled 41,168 units,

up 445 units MoM. Although the listing volume of new commodity housing

significantly rebounded in the past two months, the supply still largely fell short of the

demand. The digesting period of inventory housing was around 4 months.

30000

40000

50000

60000

70000

80000

90000

100000

Apr Aug Dec Apr August Dec Apr

UnitsChange of Shanghai Residential Inventory, Apr 2015～Apr 2017

URBAN VIEW -13-

Urban Analysis——Second-hand Residential Market

1. Transaction Volume and Price

In April, the city’s second-hand residential transaction volume totaled 15,407 units, down

20.47% MoM and 13.28% YoY; the publicized average price was RMB 39,162/sqm, up

0.09% MoM and 47.67% YoY.

2. Transaction Volume by District

By district, the transaction volume declined across the board on a monthly basis in April.

Jing’an District saw the smallest MoM decrease because of its advantageous location and

well-developed living facilities. Among exurban districts, Chongming was the district

seeing the smallest decrease.

22,000

24,000

26,000

28,000

30,000

32,000

34,000

36,000

38,000

40,000

42,000

0

10,000

20,000

30,000

40,000

50,000

60,000

16-4 16-5 16-6 16-7 16-8 16-9 16-10 16-11 16-12 17-1 17-2 17-3 17-4 RMB/m2

Transaction Volume and Price of Second-hand Housing

Transaction volume (unit) Average transaction price (RMB/㎡)

Units

-35.00%

-30.00%

-25.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Bao

shan

Ch

angn

ing

Ch

on

gmin

g

Fen

gxian

Ho

ngko

u

Hu

angp

u

Jing'an

Jiadin

g

Jinsh

an

Luw

an

Min

han

g

Nan

hu

i

Pu

do

ng

Pu

tuo

Qin

gpu

Son

gjiang

Xu

hu

i

Yangp

u

Zhab

ei

UnitsTransaction Volume of Second-hand Residential Housing by District, Mar vs Apr 2017

March April 环比

Average MoM

Growth

URBAN VIEW -14-

3. Hot Sections

Top 10 sections in terms of MoM increase in second-hand residential transaction volume in April 2017

Rank District Section No. of Units

Transacted MoM YoY

1 Jing’an West Nanjing Rd. 52 30.00% 0.00%

2 Jinshan Zhujing 112 25.84% -27.27%

3 Xuhui Fenglin 127 7.63% 10.43%

4 Putuo Changshou 61 3.39% -8.96%

5 Jinshan Middle Jinshan 70 2.94% 100.00%

6 Pudong Zhangjiang 122 -1.61% 24.49%

7 Jinshan Tinglin 61 -1.61% 38.64%

8 Baoshan Yanghang 111 -1.77% -21.28%

9 Pudong Waigaoqiao 308 -1.91% -6.10%

10 Baoshan Luodian 86 -2.27% -16.50%

4. VISS Base Price

According to the

statistics of VISS

system, in April 2016,

the city’s mean of

residential quarters was

RMB 53,813/sqm, up

1.86% MoM and 29.62% YoY; the city’s median of residential quarters was RMB

56,057/sqm, up 2.29% MoM and 33.28% YoY.

BS CN CM FX HK HP JA JD JS LW MH NH PD PT QP SJ XH YP ZB

Mar 2017 1.85% 1.67% 0.72% 2.52% 1.45% 1.26% 1.51% 1.97% 4.90% 1.30% 1.94% 2.26% 1.28% 1.44% 2.34% 2.94% 1.11% 1.56% 1.68%

Apr 2017 2.06% 2.15% 4.61% 3.07% 1.77% 2% 1.89% 2.12% 3.24% 2% 1.87% 2.14% 1.54% 2.17% 2.34% 2.22% 1.61% 1.85% 2.24%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%MoM Change of Base Price by District, Mar vs Apr 2017

Mean Median

URBAN VIEW -15-

By district, in April, all the districts continued seeing different increases in base price,

and the increases of most districts became larger compared with last month, which

ranged from 1.54% to 4.61%. The increases of exurban districts were larger than those of

most central districts.

By section, in April, the 121 sections of the city continued seeing different increases of

price. All of the top 5 sections in terms of increase were exurban sections.

5. Transaction Structure

Top 5 sections in terms of increase Top 5 sections in terms of decrease

South Songjiang

Sheshan

Baozhen

ChongmingNew Town

Zhujiajiao

10557 11539 9.31 %

27880 30340 8.82 %

11722 12678 8.15 %

20296 21355 5.22 %

21520 22534 4.71 %

No ne

below 7050.38%

70-9022.22%

90-12015.06%

120-1507.23%

150-1801.87%

180-3002.68%

above 3000.55%

Transaction Structure Second-hand Housing by Area, Apr 2017

below 0.5m3.17%

0.5m~1m7.16%

1m~1.6m13.95%

1.6m~2m9.89%

2m~3.3m39.21%

3.3m~5m13.25%

above 5m13.37%

Transaction Structure of Second-hand Housing by Total Price, Apr 2017

below 7051.35%

70-9021.88%

90-12015.03%

120-1507.23%

150-1801.74%

180-3002.26%

above 3000.51%

Transaction Structure Second-hand Housing by Area, Mar 2017

below 0.5m3.08%

0.5m~1m7.18%

1m~1.6m14.23%

1.6m~2m9.94%

2m~3.3m39.63%

3.3m~5m13.57%

above 5m12.37%

Transaction Structure of Second-hand Housing by Total Price, Mar 2017

m = million

URBAN VIEW -16-

By total price, the proportion of second-hand properties priced over RMB 5 million saw

a growth of 1 percentage point. The proportions of second-hand properties priced below

RMB 5 million saw different decreases, all of which were smaller than 0.5 percentage

point.

By area, only the proportion of second-hand properties smaller than 70 sqm dropped by

0.97 percentage point. The proportions of second-hand properties larger than 70 sqm

increased across the board. However, the growth was lower than 0.5 percentage point.

URBAN VIEW -17-

Urban Analysis——Retail / Office Market

1. Supply

1) Monthly Retail / Office Supply

The supply market of retail/office properties remained sluggish. There was still no new

office projects launched, and only 15000 sqm of new retail properties were supplied.

2) Retail / Office Supply by District

In April, there were still only retail projects launched, which were located in Jiading,

Qingpu and Minhang. The supply volume was 7853 sqm, 6789 sqm and 116 sqm,

respectively.

0

10

20

30

40

50

60

70

16/04 16/05 16/06 16/07 16/08 16/09 16/10 16/11 16/12 17/01 17/02 17/03 17/04sqm

Trend of Retail / Office Supply

Retail property Office property

x 1

00

00

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

Jiading Minhang Qingpusqm

Retail / Office Supply by District, Apr 2017

Retail property

x 1

00

00

URBAN VIEW -18-

2. Transaction Volume

1) Monthly Retail / Office Transaction Volume

Influenced by the “frozen” supply market of retail and office properties, the transaction

was also not promising. There were 128000 sqm of retail properties transacted, down

47% MoM; there were 45000 sqm of office properties transacted, decreasing by over

80% compared to the same period of last year.

2) Retail / Office Transaction Volume by District

By district, Qingpu led the retail transaction with 28000 sqm of retail properties traded.

In office sector, under the continuous support of Greater Hongqiao project, Minhang had

14000 sqm of office properties transacted, becoming the district with largest office

transaction volume.

0

10

20

30

40

50

60

70

16/04 16/05 16/06 16/07 16/08 16/09 16/10 16/11 16/12 17/01 17/02 17/03 17/04sqm

Trend of Retail / Office Transaction Volume

Retail property Office property

x 1

00

00

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Ba

osha

n

Ch

an

gn

ing

Ch

on

gm

ing

Fen

gxia

n

Ho

ng

kou

Hu

an

gp

u

Jiad

ing

Jinsh

an

Jing

'an

Min

ha

ng

Pu

do

ng

Pu

tuo

Qin

gp

u

So

ng

jian

g

Xu

hu

i

Ya

ng

pu

sqm

Retail / Office Transaction Volume by District, Apr 2017

Retail property Office property

x 1

00

00

URBAN VIEW -19-

3. Transaction Price

In April, the average price of both retail properties and office properties fell. The average

transaction price of office properties declined by 26.4% to RMB 27418/sqm. The average

transaction price of retail properties dropped by 2.6% to RMB 25749/sqm. The

increasing proportion of low-priced transacted projects in suburban and exurban districts

largely pulled down the average price.

4. Inventory Change

Because of the consecutive shortage of new supply, the digestion of inventories played a

leading role on the transaction market. At the end of April, the office inventories declined

to 8145300 sqm. The retail inventories totaled 9864100 sqm.

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

16/04 16/05 16/06 16/07 16/08 16/09 16/10 16/11 16/12 17/01 17/02 17/03 17/04RMB/sqm

Trend of Average Transaction Price

Retail property Office property

400

500

600

700

800

900

1000

1100

12

/01

12

/04

12

/07

12

/10

13

/01

13

/04

13

/07

13

/10

14

/01

14

/04

14

/07

14

/10

15

/01

15

/04

15

/07

15

/10

16

/01

16

/04

16

/07

16

/10

17

/01

17

/04

sqm

Monthly Change of Retail / Office Inventory

Retail property Office property

x 1

00

00

URBAN VIEW -20-

Cost of Construction Materials

Prices of steel, cement, yellow sand and commodity concrete in April 2017

No. Material name March 2017 April 2017 Increase or decrease

1 Wire price (Φ8mm) (RMB/ton) 4,033.87 3,820.90 -5.57%

2 HRB400 rebar (18mm) (RMB/ton) 3,864.65 3,630.10 -6.46%

3 HRB400 Rebar (25mm) (RMB/ton) 3,896.00 3,660.10 -6.45%

4

Ordinary Portland cement (strength grade

42.5) (RMB/ton)

378.39 411.00 7.94%

5 Yellow Sand (medium-coarse) (RMB/ton) 80.16 88.20 9.11%

6

Pump Concrete C30 (particle size 5-25)

(RMB/m³)

388.00 414.00 6.28%

URBAN VIEW -21-

Construction Cost Analysis Indicators

I Project Summary

Project name R&D Office Building GFA 25,733 m2

Project location Within the Middle Ring Road Height 47.5 m (first floor 5.5m, typical floor

4.2m)

Structure Frame-shear Total Floors 10 floors aboveground; 1 floor

underground

Foundation

depth 5.85m

Seismic fortification

intensity 7

Function R&D Office Building Method of charging 08 BOQ valuation (2013.05-2015.04)

II Construction Cost Indicators

No. Item Total cost (RMB) Index per sqm

(RMB/m2) Percentage

Cost for engineering & installation 83,646,490 3,250.55 100.00%

I Engineering works 40,522,300 1,574.72 48.44%

1 Soil (Stone) works 2,576,100 100.11 3.08%

2 Piling & foundation 10,340,000 401.82 12.36%

3 Masonry 2,123,100 82.50 2.54%

4 Concrete and rebar concrete 20,148,100 782.97 24.09%

5 Factory & warehouse door, special

door 1,839,000 71.46 2.20%

6 Roofing & waterproofing (incl. thermal

insulation) 979,000 38.04 1.17%

7 Anti-corrosion, insulation, thermal

insulation 2,517,000 97.81 3.01%

II Decoration works 8,331,800 323.78 9.96%

1 Ground & floor 1,702,900 66.18 2.04%

2 Doors & windows 3,225,700 125.35 3.86%

3 Cylinder & wall 1,822,100 70.81 2.18%

4 Ceiling 1,112,100 43.22 1.33%

5 Paints, coatings, wall paper 125,000 4.86 0.15%

6 Others 344,000 13.37 0.41%

III Installation works 17,034,100 661.96 20.36%

1 Electrical Engineering 5,847,500 227.24 6.99%

2 Water supply & drainage 513,300 19.95 0.61%

3 Fire protection 3,144,400 122.19 3.76%

4 Air-conditioning & ventilation 4,388,600 170.54 5.25%

URBAN VIEW -22-

5 ELV 1,410,700 54.82 1.69%

6 Elevator 1,729,600 67.21 2.07%

IV Measure fees 11,781,200 457.82 14.08%

V Main-contractor service fee 178,290 6.93 0.21%

VI Government gees 3,230,700 125.55 3.86%

VII Taxes 2,568,100 99.80 3.07%

Shanghai Urban Construction Cost Consulting Co. Ltd.

URBAN VIEW URBAN VIEW -23-

URBAN VIEW -24-

Targeted increase of loan rate begins

Recently, it was said that some banks in Beijing released new notices on home loan

rate. The loan rate of first home mortgaged after May 1 can be as low as the

benchmark interest rate; the loan rate of second home mortgaged after that May 1

would be raised by 20%; the loan rate of first home mortgaged before April 30 can be

as low as the 95% of benchmark rate. It was also said that many banks in Shanghai

have raised the first home loan rate from previous 90% of the benchmark rate to 95%

or even the same as the benchmark rate. Moreover, some banks in Shenzhen and

Guangzhou also successively reduced the concessions of first home loan rate. As all of

these cities are first-tier hot cities, it was called “targeted increase of loan rate” in the

industry.

URBAN VIEW -25-

Urban View:

Shao Minghao

Project Director

Shanghai Urban Real Estate Appraisal Co., Ltd.

We should first notice that the “targeted increase of loan rate” in Beijing was made by

“some banks”, which meant it was not a universal action. In other words, it was an

action of banks’ own accord based on their business situation, instead of an

administrative order. From this point of view, the targeted increase of loan rate was not

a necessary step of Beijing’s macro-control.

Why did these banks make “targeted increase of loan rate”? I think there are many

factors. First of all, the home lending quotas of some banks are small (not all the banks

put great efforts to develop mortgage business). After the boom of housing market in

Beijing from the second half of last year to the first quarter of this year, the fact that

there is not much of the quota left now may be the most direct reason for their

adjustment on loan rate. Secondly, it was the increase of loan rate instead of the

increase of down payment requirement or the tightening of other conditions, which

indicated that the purpose of the banks was not curbing the demand for home purchase

but improving their profits from lending business. To get more mortgage lending

business, most commercial banks have provided discounts of loan rate as enticement

for a long time. When their annual quotas of lending became not enough, it is a normal

commercial behavior to select the high-quality clients who can bring higher profits

through raising the loan rate. Besides, influenced by multiple rounds of regulation on

real estate market, mortgage lending is no longer the best business choice for banks.

Although the loan rate adjustment was an autonomous behavior of some banks, from a

nationwide perspective, people will still raise two questions. One is whether other

banks will follow them, and the other is whether it will become the prelude of

URBAN VIEW -26-

nationwide interest-rate rise. The first question is easy to answer. If mortgage lending

is not the main part of a bank’s asset allocation and the bank has already lent a large

amount over the past period, this bank is very likely to raise the loan rate to enhance

its profits. Of course, not all the banks have to do like this as there is no administrative

order. The second question is difficult to give answer. According to some indicators

such as “China inter-bank offered rate”, the rise of rates is under pressure. Especially,

the external stimulus from the Fed’s increase of interest rates can justify the domestic

rise of rates. However, domestic economic data do not support the increase of rates.

The increase of rates will make the economic uncertainty worse. Furthermore, under

stagnant real economy, where can the capital extruded from the real estate market go?

URBAN VIEW URBAN VIEW -27-

URBAN VIEW -28-

Study on quantitative analysis of the ecological benefits

from land reclamation in suburbs of metropolis

1. Brief of the subject and source of the data

1.1 Brief of the subject

Langxia Town Land Reclamation Project is located in Langxia Town of Jinshan

District, Shanghai. The project covers a total area of 1687.34 hectares, with a total

investment of RMB 709,659,800. The project commenced in October 2013 and

completed in December 2014, including land leveling, river improvement, irrigation

and drainage, country road works, farmland shelterbelt works, and ecological

conservation.

URBAN VIEW -29-

Figure 1 Location map of the subject

1.2 Source of the data

The data involved in this article are mainly from the approved plan of the project. The

social and economic data are from relevant official websites and Shanghai Statistical

Yearbook.

2. Contents and methodology of ecosystem services valuation

2.1 Contents of ecosystem services valuation

Tab.1 Contents of Ecosystem Services Valuation

Category Sub-category Valuation Content

Supply service Food production ——

Raw material production ——

Regulation service Gas regulation Carbon fixation and oxygen

production

Air purification

Greenhouse gas emission

URBAN VIEW -30-

Climate regulation Climate regulation

Hydrological regulation Water storage

Waste treatment ——

Support service Soil conservation ——

Biodiversity maintenance ——

Cultural service Landscape aesthetics Ecological recreational service

2.2 Methodology of ecosystem services valuation

2.2.1 Gas regulation

(1) Carbon fixation and oxygen production

According to the literature, the general formula for the value of carbon fixation and

oxygen production of crops per unit area is:

Crop: VN=N×S×B×t N=J×(1-r)/f Formula 1

Tree: VL=L×A×B×t Formula 2

VN is the value of carbon fixation and oxygen production of crops; N is net biomass;

S is the area of crops; B is the cost of carbon fixation and oxygen production; t is the

coefficient of carbon fixation and oxygen production (the coefficient of carbon

fixation is 1.63; the coefficient of oxygen fixation is 1.20); J is the economic yield of

crops; r is the moisture content of the economic yield of crops; f is the economic

coefficient of crops; VL is the value of carbon fixation and oxygen production of

shelter forest; L is the net annual primary productivity of shelter forest; A is the tree

number of shelter forest.

(2) Air purification

The subject area has a large space of rice fields and shelter forest, which can purify

the air of the subject area. However, there is no factory releasing contaminant in the

subject area. Therefore, we only consider the ecosystem value of dust absorption

function.

URBAN VIEW -31-

Vd= Cd×Qd Formula 3

Vd is the value of dust absorption function; Cd is the cost of reducing dust absorption;

Qd is the amount of dust absorption. Qd = amount of dust absorption of rice field per

unit area × newly-increased rice field area + area of shelterbelt × amount of dust

absorption of shelterbelt per unit area; area of shelterbelt = tree numbers of shelterbelt

× interplant distance × width of shelterbelt

(3) Greenhouse gas emission

① Calculation of greenhouse gas emission

The formulas for calculating the increased emissions of N2O and CH4 after land

reclamation are as follows:

N2O emission =area of new irrigated rice fields × annual emission of N2O of rice

fields Formula 4

CH4 emission = area of new irrigated rice field × annual emission of CH4 of rice

field Formula 5

② Loss value of greenhouse gas emission

In the valuation of global ecosystem services, Costanza used RMB 0.91/kg and RMB

24.37/kg to analyze the loss value of CH4 and N2O.

Vw = CH4 emission×RMB 0.91/kg + N2O emission×RMB 24.37/kg Formula 6

2.2.2 Climate regulation

Pleasant temperature and humidity can provide comfortable environment for people,

where people can get intangible benefits. The intangible benefits should be included

in ecological benefits.

P=(N/��)Pi Formula 7

In this formula, P is the adjusted value of ecosystem services per unit area, Pi is the

URBAN VIEW -32-

benchmark unit price of the ecosystem, N is the annual net biomass of the ecosystem

before/after land reclamation, and N�is the average biomass of ecosystem per unit

area in China.

2.2.3 Water storage

To consolidate scattered parcels and make the rate of newly increased cultivated land

reach over 3%, many ponds, waters for aquaculture and beheaded creeks in the

subject area are filled.

Vx=W×C W=W1+W2 Formula 8

In the formula, Vx is the value of water storage function, W1 is the difference between

the excavation amount and filling amount of ponds, waters for aquaculture and

beheaded creeks, W2 is the difference between the amount of river dredging and

excavation and the amount of filling, and C is the cost of reservoir storage.

2.2.4 Cultural service

The value of environment and landscape of the subject after land reclamation can be

represented by its tourism value.

Vt=(travelling expenses + travelling time cost + other expenses) × passenger flow

Formula 9

2.2.5 Ecological benefits amendment

Because of inflation, the same amount may have different actual value in different

years. Therefore, we discount all the function values to the values in 2014 using CPI

growth over the years, which can represent the values of different functions of the

ecological environment.

URBAN VIEW -33-

Tab.2 Shanghai CPI growth over the years %

3. Research Results

3.1 Gas regulation

According to the project plan, after land reclamation, the cultivated land area will

increase to 1266.77 hectares from 1210.87 hectares; the types and numbers of trees of

the newly-increased farmland and shelterbelt are listed in table 3:

Tab.3 Basic introduction of new added farmland shelterbelt

Unit: plant

Tree Type Number

Metasequoia 18352

Taxodium mucronatum 5682

Weeping willow 2457

Gingko 1691

(1) Carbon fixation and oxygen production

After land reclamation, the irrigated rice field area rose to 985.46 hm2 from 904.83

hm2, up 80.63 hm2. Moreover, under the support of shelter forest and irrigation

facilities, the output per mu of rice field increased from 569.2kg/mu to 654.58kg/mu.

According to some previous researches, the economic coefficient of rice f=0.45; the

water content of rice seed r=27.17%. Using the formula, we can derive that the net

annual biomass of rice before land reclamation is 27.64t/hm2, and the net annual

biomass of rice after land reclamation is 31.78 t/hm2.

The trees are mainly metasequoias which are suitable for local environment. There are

totally 28479 trees. Referring to relevant literature, the net annual biomass of

metasequoia is 4.27kg/plant.

Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

CPI 102.80 100.00 101.50 102.50 100.00 100.50 100.10 102.20 101.00 101.20 103.20 105.80 99.60 103.10

URBAN VIEW -34-

According to relevant literature, the value of CO2 fixation is RMB 273.3/t, and the

value of oxygen production is RMB 352.93/t. Using Formula 1 and Formula 2, we

can calculate that the value of carbon fixation and oxygen production can rise by

RMB 5,592,200 after land reclamation. The details are shown in table 4:

Tab.4 Value change of carbon fixation and manufacturing oxygen after land reclamation (in

RMB 10000)

New irrigated rice

fields Old rice fields Shelter forest Subtotal

Value of

carbon

fixation

114.16 167.10 5.42 286.68

Value of

oxygen

production

108.53 158.86 5.15 272.54

Total 559.22

(2) Air purification

The newly increased area of irrigated rice fields is 80.63 hm2, the average interplant

distance of the shelter forest is 2.25m, the width of shelter forest is 0.8m, and the

shelter forest has 28479 trees. Thus, we can derive that the area of shelter forest is

51262.2m2. According to the literature, the dust absorption function of rice field is

0.92t/hm2/a, the dust absorption function of shelter forest is 3.15t/hm2/a, and the cost

of reducing dust absorption is RMB 150/t.

Using Formula 3, we can derive that the value of dust absorption function after land

reclamation increases by RMB 13500.

(3) Loss value of greenhouse gas emissions

After measurement, the annual emission of N2O is 1.63kg/ha and the annual emission

of CH4 is 15.3g/m2 in south China under general condition.

Using Formula 4 and Formula 5, we can get the newly-increased emission of

greenhouse gas, and according to Formula 6, we can derive the value of loss caused

URBAN VIEW -35-

by the newly-increased emission of greenhouse gas is RMB 14500.

3.2 Climate regulation

According to the literature, the benchmark unit price of farmland ecosystem is RMB

435.63/hm2/a, and the average biomass per unit area of China’s farmland ecosystem is

50t/hm2. According to the Table 6-6, we know that the original cultivated land area is

1210.87 hm2, and the cultivated land area after land reclamation is 1266.77 hm2.

Using Formula 7, we can derive that the value of climate regulation of the subject

land reclamation project increases by RMB 59200.

3.3 Water Storage

Tab. 5 Basic information on excavation and filling

Item Work Quantity/10000 sqm Notes

Pond earth 2.37 Excavation

85.6 Filling

Beheaded creeks

0.17 Excavation

12.8 Filling

River

49.58 Excavation

14.43 Dredging

23.5 Filling

According to the difference between the excavation amount and the filling amount in

Table5, we can derive that the amount of filling is 1219000 sqm and the amount of

excavation is 665500 sqm. In other words, the water storage volume decreases by

553500 sqm (553500t). According to relevant literature, the cost of reservoir storage

is RMB 0.67/t.

Using Formula 8, we can derive that the loss value of water storage function is RMB

370800.

URBAN VIEW -36-

3.4 Cultural service

The cultural service value of the subject includes transportation fee, admission ticket

fee, picking fee, food expense and time cost, the details are as follows:

(1) Transportation fee: Going to the land reclamation project area of Langxia Town

for a trip from People’s Square metro station will take 1.5 hours. The distance is about

81.1 kilometers. According to the fuel consumption per hundred kilometers, the

gasoline price, the number of passengers and the parking rate of Langxia countryside

park, we can derive that the transportation fee for a round trip is RMB 21.5/person.

(2) Admission fee: Now most areas of the subject are open for the public for free.

Langxia Ecological Park requires RMB 50/person, however, not all the visitors will

buy tickets to visit this park. We set the buying rate as 75%; then, the average

admission ticket fee is RMB 37.5/person.

(3) Picking fee: Picking garden is the most popular area of the subject. Taking

strawberry picking as example, the price is about RMB 30/person/500g. Usually, each

visitor will pick 1-1.5kg strawberries (using the average – 1.25kg), then the visitor’s

purchasing power is RMB 75/person.

(4) Food expense: The restaurants in the vicinity of the subject include Jinjiang

Zhonghua Village Farm House and Langxia Ecological Garden. According to the

average consumption per person in Jinjiang Zhonghua Village Farm House, the

visitor’s food expense is about RMB 50/person.

(5) Time cost: According to the website of Shanghai Human Resources and Social

Security Bureau, the average salary of employees in Shanghai in 2014 is RMB 65417

and the monthly wages averages RMB 5451. We can thus calculate that the daily

wages are RMB 181.7/day/person so the time cost is RMB 181.7/day/person.

According to the current visitor flow, we can estimate that the annual visitor flow of

URBAN VIEW -37-

the subject is 106000 persons.

Using Formula 9, we can derive that the value of cultural service increases by RMB

38,764,200.

3.5 Ecological benefits amendment

The changes of ecosystem services of the subject before and after land reclamation

are as follow:

Tab.6 Value of ecosystem service value change in the project area

Item Carbon fixation &

oxygen production

Air

purification

Greenhouse gas

emission

Climate

regulation

Water

storage

Cultural

service

Year 2007 2014 1997 2007 2014 2015

Value 559.22 1.35 -1.45 5.92 -37.08 3876.42

The results after amendment based on past CPI increases are as follow:

Tab.7 Amendment value of ecosystem service value change in the project area

Carbon fixation &

oxygen production

Air

purification

Greenhouse gas

emission

Climate

regulation

Water

storage

Cultural

service Total

712.38 1.35 -2.07 7.54 -37.08 3876.42 4558.5

4

4. Conclusion

(1) Land reclamation can produce relatively high ecological benefits. According to

calculation, the ecological benefits of the subject have a net increase of RMB

45585400 after land reclamation. According to the project plan, the economic benefits

can have a net increase of RMB 26711700 after land reclamation. It shows that the

ecological benefits brought by land reclamation are much larger than the economic

benefits. However, not all the ecological benefits can be converted into economic

benefits.

(2) Land reclamation produces negative influence on the greenhouse gas emission and

URBAN VIEW -38-

water storage service values of the subject area, and the negative influence on the

latter is the largest.

(3) Land reclamation produces positive influence on the value of carbon fixation and

oxygen production, air purification, climate regulation and cultural service. Its

influence on the net benefit of cultural service is the largest, accounting for 85.04% of

the overall ecological gain of the subject.

URBAN VIEW URBAN VIEW -39-

URBAN VIEW -40-

Policy: Provisions on strengthening the administration of

business-oriented land transaction

The official website of Shanghai government released Several Provisions on

Strengthening the Administration of Business-oriented Land Transaction on April 21.

The document required strengthening the life cycle administration of

business-oriented land transaction and set forth several new important provisions on

the transaction of retail and office land.

Urban View:

The most eye-catching

part in the Provisions is

the requirement that

“transaction contract shall

clarify that office land is

not allowed to be used for

building apartment-office

projects; retail land is not

allowed to be used for

building service apartments without agreement.”

Under such explicit stipulation by the government, the existing “quasi-residential”

projects will become rarity. As far as we know, the previously halted

“quasi-residential” projects are just part of the all. Those projects which are still for

sale will certainly become the focus of investors.

There are also articles in the Provisions requiring that land transaction contract shall

define the holding percentage and years of retail and office properties. The Provisions

also pointed out that “the office and retail space available for sale as agreed in the

transaction contract should be sold in floor. Previously, many retail and office space

were developed into small-sized units for quick sale, which caused great difficulty in

management and therefore led to the failure of project operation. Under butterfly

effect, it became one of the reasons for the high inventories of retail and office

properties.

URBAN VIEW -41-

Finance: The sale of new housing adopts notarized lottery in

Shanghai In May, Shanghai Commission of Housing and Urban-Rural Development issued a

notice requiring that the sale of newly launched projects shall adopt lottery held by

notary organization; the purchase shall strictly follow real-name registration system;

any additional fees or charges are not allowed; staff of developers, agents and

brokerages are not allowed to sell the numbered tickets; any developers violating the

stipulation will be halted from selling and their qualification will be degraded or

cancelled.

Urban View:

Actually, lottery sale has already become a usual tactic of many developers before the

issuance of this notice. However, at that time, developers were over entitled to

manipulate the supply of housing, which resulted in various illicit phenomena, such as

waiting fee, disguised price increases. Unstandardized lottery sale provides large

space for developers’ backroom deal. Therefore, to ensure the fairness and

impartiality as much as possible, Shanghai adopts lottery for home purchase. This

measure, along with other regulatory policies on real estate market, can curb the

speculation and panic purchase, protect the interests of ordinary buyers and make the

real estate market more stable and sound.

As a key first-tier city,

Shanghai’s new regulatory

policy on real estate

market is like a direction

for surrounding cities.

From this point of view,

other first-tier cities under

similar conditions are

likely to follow this

notarized lottery.

URBAN VIEW -42-

Market: CBRC requires preventing risks in ten major fields On April 10, China

Banking Regulatory

Commission released

Guiding Opinions on the

Risk Prevention and

Control of Banking

Industry. The purpose is

to urge banking financial

institutions to dispose a

batch of major risk

points, eliminate a batch of hidden risks, and further improve the level of risk

management. The Guiding Opinions define the ten major fields of risks in banking

industry, including both traditional fields (such as credit risk, liquidity risk, real estate

risk and local government debt default risk) and non-traditional fields (such as bond

volatility risk, cross-financial risk, Internet financial risk, and external impact risk).

Urban View:

The high leverage contributed by 0% down payment is one of the important factors of

the excessively rapid jump of home price. In first-tier cities where home price is

already high, 30% down payment is usually as much as nearly RMB 1 million, which

is a very great amount of money for most ordinary buyers. “Down payment loan”,

appearing as a financial instrument, then becomes the best tool to solve the problem

of financing. However, it also encourages the demand of speculation. The speculators

can reap staggering profits through “down payment loan”, which brings many risks to

the real estate market.

Fortunately, now the administration takes measures to regulate the industry. In

addition to cracking down on the “down payment loan”, the administration also

requires that banks must strictly control the scale of mortgage lending and avoid

overly lowering the rate. For some time to come in the future, the tightened policies

on mortgage lending may continue and is unlikely to change in the short run.

URBAN VIEW -43-

Market: The State Council encourages the development of housing

rental market

On the executive meeting of the State

Council on May 4, the Premier of the

State Council required cultivating and

developing housing rental market and

pushing forward new urbanization to meet

people’s housing demand. This meeting

set forth measures on four aspects to

support the development of housing rental

market, including using existing housing

or newly-built housing to develop rental business; promoting the monetization of

public rental housing; improving tax preferential policy; using standardized format of

tenancy agreement.

Urban View:

According to the research on cities with well-developed real estate market, the people

that rent housing accounted for 65% of the population while the people own housing

merely accounted for 35%. Therefore, in the long term, leasing will play an absolutely

leading role in future’s housing market. However, the professional leasing business in

China is less developed now. Most developers make profits through selling instead of

leasing. There are some pilot products of professional leasing business, such as long

tenancy apartment which provides fully furnished units by the developer renting a

whole building and making uniform decoration. Nevertheless, the long tenancy

apartments are mainly converted from commercial properties, showing the

insufficiency of supply. Therefore, considering the current situation of China,

individual housing leasing shall also be supported and standardized. After all, the high

homeownership rate will offer powerful support to the supply on housing rental

market.

URBAN VIEW -44-

Market: The bidding threshold of residential land further enhanced

On April 11, Shanghai Land Transaction Center announced that three parcels of

residential land in Luchaogang of Lingang and Fengcheng Town of Fengxian, which

were suspended from transaction because of unfinished fund auditing, would be

supplied to the market again, but the previous listing procedure was changed to

bidding and listing procedure.

Urban View:

After the “Six Regulatory

Policies on Real Estate

Market” in last year, the

government enhanced the

eligibility of purchasing

residential land by

requiring that the bidders

shall use equity fund and the bidding price shall not be higher than their declared

equity fund. From then on, the boom of residential land transaction market was

somewhat mitigated. However, as the market was gradually adjusted to the new

policies, the transaction premium rapidly increased again. For example, the three

residential parcels in Luchaogang and Fengxian attracted double-digit bidders, and the

transaction of these land parcels were thus halted.

In bidding mode, the bidders will be graded from the aspects of economic strengths,

technical qualifications and project experience. The top three will be included in the

finalist of bidding. It is a reshuffling of land purchasers. The compound mode of

bidding and listing can effectively control the number of residential land bidders in

three. The reduction of bidders can make land purchase more rational and avoid high

premium, which will to some extent control land price.

URBAN VIEW -45-

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2. All the information and data published in the issue are derived from our

integrated analysis and only for reference. We do not take any legal responsibility

for its accuracy.

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