This is the consensus of senior experts and government officials who, nevertheless, are also worried about the surging local housing market.

The real estate industry is adding more and more to the city's economic growth - the sector's contribution to the city's total gross domestic product has grown from 0.5 per cent in 1990 to 6.9 per cent last year.

"The percentage point is sure to exceed seven this year and by 2007 or 2008, the goal set for the next fifth-five year plan period - 10 per cent will be reached," said Gu Jianfa, director of the Real Estate Industry Research Centre of Shanghai Academy of Social Sciences.

"Considering comprehensive factors, local real estate industry will stay safe and sound till 2010 when the city hosts the World Expo," Gu said.

Shanghai has been sparing no efforts in building towards its goal of becoming a "world city" and has been enhancing its international competitiveness in all areas.

More and more overseas Chinese and foreigners are becoming attracted to the idea of purchasing real estate in Shanghai either for living or for investment purposes.

Energetic macro-economy

The outstanding achievement the city has made in fighting the SARS threat surprised the world, sending a signal that Shanghai is a credible city and suitable for both living and working.

The other reason Gu said is that industrial development follows its particular rules. Usually industry world-wide goes through the following four stages:

?Extrication: When the gross domestic product (GDP) per capita is below US$3,000, the goal is to enable each household to get an apartment.

?Expansion: When the GDP per capita is between US$3,000-8,000, the goal is to enable each person to get an apartment.

?Enjoyment: When the GDP per capita is between US$8,000-15,000, the goal is to enable everybody to live a comfortable life.

?Individuality: When the GDP per capita exceeds US$15,000, the family lives an easy life in villas or apartments which fully demonstrates the residents' individuality.

"There is still a strong demand in the market to boost the industry which stays in the second stage," Gu said. "The trend is to go on till 2008 when the GDP per capita reaches US$8,000."

The investment in real estate of Shanghai has maintained an annual increase of 10 per cent in the past three years and 74.9 billion yuan (US$9.1 billion) of investment was injected into the sector in 2002.

Over the same period, individual purchasers of commercial buildings exceeded 90 per cent and reached 98 per cent last year.

"The strong growth of the macro-economy of the city will prop up the stable development of the local property market," said Cai Yutian, director of Shanghai Municipal Land Resources and Housing Administration Bureau.

World Expo spur

The real estate market has entered a prosperous and buoyant stage since the start of this century and the news to hold the five-month-long international gala serves as a great stimulation.

Giving the keynote speech at a symposium on the topic of "The World Expo and Shanghai's Real Estate Industry," he said that Shanghai would directly invest US$3 billion in the construction of the venues for the event, which would bring along investment five to ten times that amount.

The investment in real estate development has accounted for one third of the city's total investment on fixed assets for several consecutive years and the trend is sure to be continued up to 2010.

People's desire to improve the living condition will be facilitated by their swelling disposable income and demand will foster sustainable development of the industry, Cai said.

By 2002, the living area per capita in Shanghai had reached 13.1 square metres and the figure is to increase due to the steadily booming economy.

Both Cai and Gu agreed that, personally, they thought housing prices had risen too fast since 2000, but from the perspective of the government and the large number of apartment owners, a sharp drop of price would be unwelcome. They would not like to see a sudden and dramatic drop in market value.

"As the development of real estate industry relates to scores of other industries, a gloomy market will bring down the whole economy and affect social stability, which is what the government does not want to see," Gu said.

That is why the People's Bank of China has recently issued new housing loan policies to regulate the industry, aiming to wash out developers and builders who base their own business on bank loans instead of their own financial power.

As the new policy sets a higher threshold for buyers of a second property, fewer people will be seen buying apartments for investment purposes.

Today about 70 per cent of the loans of China's four biggest commercial banks are issued to the real estate sector, which is very risky if and when the economy meets any difficulties, Gu said.

The new housing loan policies will help to reduce risks and safeguard the industry to go along steadily.

"The price will remain stable though the top-end market might be affected a little," said Edward Cheung, general manager of DTZ, an international property consultancy company.

As the market decides the price, the rising prices for local property contributes to the improvement of real estate quality and the general environment, Cheung said.

He added that in the coming months, about 20 million square metres of new apartments and 20 million square metres of second-hand apartments will go on the market, which will help to calm possible anxiety.

Ladder structure

A misunderstanding that every household should purchase an apartment of their own was also corrected by the experts and officials.

"Even in very modernized countries, not every family owns an apartment," Cai said. "The housing consumption should be a ladder structure."

People in a strong economic position buy villas or apartments while those in a weaker position rent apartments and the poorest depend on the government for housing which means the second-hand property sector should be more active.

In the city now, the second-hand sector has just been getting off the ground and it will take a long while to become mature.

"It is the mission of the government to create fairness and to take care of each layer of society," Gu said. "Thus the government needs to take up more responsibilities securing a safe and sound property market."

The government will offer more land for cheaper housing targeting low-income families.

More comprehensive social security measures will be worked out to ensure that poorer families striving at or below the poverty line have a reasonably nice place to live in, Gu said.