The city has greatly increased compensation fees for urban relocation this year in response to continuously surging housing prices, officials said.

The city revised redemption standards for urban relocation at the end of last month, increasing the lowest level of reparation fees to residents in all districts, according to the Shanghai Housing and Land Administrative Bureau.

Among all areas in the city, the Class-A region in Jing'an District, which features high-end office buildings, boasts the highest compensation at no less than 7,700 yuan (US$928) per square meter, up 67 percent from a year earlier.

The compensation fee for the Class-A region in Pudong New Area, which includes the site of World Expo 2010, jumped to at least 5,700 yuan per square meter - a 36 percent increase from a year earlier. Average compensation growth in the city's downtown areas ranges from 2,000 yuan to 3,000 yuan per square meter, according to the bureau.

Industry insiders said the new step will put pressure on property developers as they will need to spend more on relocating residents.

"The rules will probably drive some small players out of the market as the costs of relocation are expected to jump," said Yang Zijiang, real estate research director with Fortunite Consulting Co Ltd. "Large developers may also face pressure whether to increase the housing price since it has already stayed at a high level."

Although reparation fees have jumped significantly, several residents still express dissatisfaction with the lower-than-expected increase.

"The compensation fee is not high compared to soaring housing prices nowadays," said Qian Guohua, a resident who lives in a Zhabei District area that will be relocated.

Qian also said that most houses to be demolished are usually small, therefore the fee isn't enough to cover the expense of buying new and large apartments.

Shanghai's average new housing price hit 5,381 yuan per square meter in May, the highest on the Chinese mainland.

Analysts said prices would likely remain high as demand remains fundamentally strong.

(Shanghai Daily July 23, 2004)