Chen Xiaoyang, an investor from Zhejiang Province, has decided to sell all of the three apartments she bought in Shanghai last year, even if she could make more money should the city's property prices rise even further than they have over the past three years.

Chen is eager to quit the city's housing market over concerns that government policies could bring an end to the spate of price rises.

She is not the only person in Shanghai to have made such a decision. Sales of second-hand apartments increased by 15 per cent in the city after the People's Bank of China raised the housing loan rate on March 17th, according to statistics from the Shanghai Branch of Midland Realty, a Hong Kong-listed property agency.

This followed hot on the heels of steps taken by the Shanghai municipal government to curb property speculation and increase the supply of medium and low-priced housing.

On March 7, the local government introduced a capital gains tax of 5.55 per cent on homes being sold within a year of their purchase.

Analysts said this measure was taken to discourage speculative investment, seen as the major reason for the city's rocketing house prices.

Such is the surge in prices, that many local residents have complained that it is now almost impossible for them to purchase apartments in the city.

The average price of local residential buildings was 6,385 yuan (US$772) per square metre in 2004, a year-on-year increase of 14.6 per cent, while the average per capita disposable income of the Shanghainese only increased 12.2 per cent over the same period, according to official statistics.

Li Xu, an analyst at the city's Hanyu Property Agency, pointed out that price rises in downtown Shanghai are actually much greater. Prices of prime location apartments surged more than 20 per cent in the first two months of this year.

Property prices rose by a national average of 10.8 per cent year-on-year in the fourth quarter of 2004, accelerating from an 8.6 per cent gain in the previous three months, government figures showed.

Excessive demand relative to the local housing supply is the real reason for the high prices, said local property experts.

A total of 32.33 million square metres of new apartments were under construction in 2004, while only 30.76 million square metres of housing has been completed.

Industry insiders said the situation became worse as speculators swarmed into the city in the hope of benefiting from Shanghai's real estate boom.

(Agencies)

spate: a large number or amount or extent（大批，大量）

speculative: not financially safe or secure（投機(jī)的）

disposable income : （可支配性收入）