Shanghai’s own unique architectural history has also prompted foreigners to take up residence in traditional properties. Jean-Michel Dumont, managing director of public relations firm Ruder Finn, moved into a restored French Tudor-style home in the city’s French Concession area 13 years ago.
"All the agencies at that time were telling me that foreigners were banned from living in old houses and should stay in new buildings," said Dumont. "They showed me new apartments that I kept turning down until they realized that I would not give up."
When he finally found his three-story, four-bedroom house, built in 1937, there was much work to be done. Dumont began tearing down walls, refurbishing old fixtures and searching local antique markets for 1930s-era furnishings. Lacking central heating and with the property’s fire places destroyed during the Cultural Revolution, the first winter was his first challenge.
"We ended up living the whole winter in the bedroom, the only place with a heater full-time," he said.
In all, Dumont estimates he has spent US$30,000 on restoration. After renting for six years, he jumped at the chance to become a homeowner when Chinese law began allowing foreigners to buy property in 2001. Dumont is satisfied with his investment. "[The prices of] old houses seem to be more resilient than new in a soft market."
According to Sabrina Yao, residential department manager of Joanna Real Estate, which rents old houses in Shanghai, prices for refurbished old houses have stayed comparable to high-end apartments. French Concession houses sell for approximately US$3,000 per square meter. She estimates old property rentals comprise 10-20% of her company’s business, which has held steady since 2006.
The city’s limited supply of refurbished old houses has meant long-term price stability.
"Ten years ago, the demand for historic properties was small, and few old houses were renovated for rental," said Wm Patrick Cranley, founder of Historic Shanghai, a local preservationist group. "Prices dipped dramatically in 1998 as a result of the Asian Financial Crisis, but bounced back by 2000 and have stayed high since."
However, while high prices have meant healthy returns for the properties’ owners, new demand-side challenges loom. The city’s number of expatriates is expected to fall next year because of the global financial crisis.
Yao notes that most old homes are purchased by Chinese investors who then rent to a largely expatriate demographic. She expects both the old home purchase market and rental market to be down slightly next year.