Shanghai's booming real-estate market is finally becoming more accessible to foreign players as China's restrictions on property loans and the introduction of public land tenders in its most affluent city opens up a more level playing field.

"We now feel that we can compete head to head with local developers in a transparent market," said Richard David, chief executive officer of First China Property Group, which was the first non-Asian buyer to secure a site in Shanghai in September 2003.

Along with selling government land via open tenders, David said another landmark development for Shanghai's property market has been government restrictions on banks issuing property-related loans.

As one of the measures to cool the country's economy, the People's Bank of China, the central bank, began reining in bank borrowing by developers and individuals by various credit tightening measures on property lending.

As a result, many small developers in Shanghai are expected to be squeezed out of the market as new cash to meet capitalization requirements for unfinished projects is now beyond their reach.

"What is happening in Shanghai's property market is a financing replacement process. Sites will now only go to legitimate buyers that are well capitalized," said David.

"And this is exactly what we want to see as a foreign developer," he added.

First China Property is a 50-50 joint venture between Australia's biggest investment bank Macquarie Bank (MBL.AU) and investment fund Schroder Asian Properties. Two months after Shanghai implemented land tenders, First China Property successfully bid for an 83,000-square-meter plot in Anting, one of Shanghai's new towns and home to China's first Formula One racing circuit.

Operating as a residential developer on one side, First China Property also acts as a fund manager that raises equity from global real estate investors to finance its construction projects.

Its business model allows First China to attract foreign investors which are reluctant to directly invest in China's listed developers, a sector that has been embroiled in numerous financial scandals.

First China Property plans to develop US$400 million of projects in Shanghai and other centers in China over the next five years.

Shanghai's property market has been on a roll since 2001. Average residential prices in the city rose by 25 percent a year from 2001 to 2003.

David, however, rejects the suggestion that a bubble is forming in Shanghai's residential market.

He points to the huge housing demand after Beijing's decision in 1997 to stop State-owned enterprises providing staff with cheap housing.

(Xinhua News Agency December 8, 2004)