WITHOUT conscious effort, Yao Wenjiang's personal property has increased in value by a factor of three or four in less than four years.

Yao bought an old garden house on Jianguo Xilu in 2000, which cost him over 2 million yuan (US$241,838) at the time. But now his house is estimated to be worth between 8-10 million yuan.

Yao's house located in a quiet lane was built over 60 years ago. "I bought this house because I like the environment, and the old style," he said. "But I won't sell it, no matter how valuable it is now."

Yao's story is not especially unusual. In the past three or four years, the prices of such old houses has increased by about 80 per cent, according to the statistics of the Stanford Old House Sales Office.

Yu Jing, an official with Stanford, gave an example. A businessman from Taiwan bought an old house on Hunan Lu through his office at the end of 2001. The price for the 350-square-metre house, with a 250-square-metre garden, was 7 million yuan (US$840,000) at that time. He also put over 1 million yuan (US$120,000) into interior decoration.

At the beginning of last year, he sold it for 16 million yuan (US$1.9 million). Now, Yu estimated, it was worth about 20 million yuan (US$2.4 million).

Another and better known example concerns the Liangyou Villa on Huaihai Xilu. Since 2002, the house underwent two purchases, with the price rising from the original 3.7 million yuan (US$444,000) to an estimated 13 million yuan (US$1.57 million) today.

"I could tell you many more such stories," Yu said.

Garden houses

Living in an old house with a garden is a dream for many people nowadays. "According to my knowledge, the historical value and graceful construction of such dwellings attract many people to invest in them, naturally, the price then rises," said He Fang, a teacher in the department of real estate at Tongji University.

The definition of so-called "garden houses" is of independent or villa-style houses built before the country's Liberation in 1949. Generally speaking, they cover 300 to 700 square metres with another 100 to 500 square metres of garden.

Presently, the city has about 4,000 to 5,000 houses of this kind. They are often exquisitely built, with a dining room, sitting room and several bath rooms. But of these, only about 50 to 60 houses - whose property rights are clearly formalized - can be bought and sold.

During the process of public acquisition of previously privately owned property after Liberation, the property rights of many garden houses became confused.

The garden houses were mostly located in four downtown districts with about 39 per cent located in the Xuhui District, 29 per cent in Changning, 9 per cent in Luwan and 8 per cent in Jing'an.

In the downtown area, most are joint villas, covering about 200 square metres. In some more remote places such as the Hongqiao area, big independent houses are available.

Their style of construction varies, with examples of European, American, Russian and Japanese designs to be found.

Hot market

Previously, it was not permissible to buy or sell the old garden houses.

"Since the city government cancelled the rule prohibiting the purchase of old garden houses in 1998, the business became very vibrant at an incredible speed," Yu said.

In 2001, the supply of old garden houses had risen by 16 per cent over the figure for 2000. By 2002, it had climbed a further 18.5 per cent.

At the same time, the price per square metre also rose quickly, to 20,000 or even 30,000 yuan (US$2,400 or 3,600), depending on differences in the quality of construction and location. Prices are widely perceived to have risen by 70 to 80 per cent over three years.

Despite the huge price rises, the demand for old garden houses has continued to skyrocket. The ratio of supply to demand is approximately 1 to 4. "That means, for every old house, there are four buyers competing to buy it," Yu said.

According to the statistics of Stanford, which began its real estate business in 1995, among all the buyers of old garden house at least 71 per cent are speculative investors, with the remaining 29 per cent seeking a place to live.

Most of the individual buyers are from Taiwan and Hong Kong, with business people from Southeast Asian countries also accounting for a considerable proportion, according to Cai Manghua who is in charge of the rental and purchase business for Stanford.

Though by local standards the prices of old garden houses are very high, compared with the prices in Hong Kong, they are still low. In Shanghai, for anyone with 5 million yuan (US$600,000), an old house is available. But in Hong Kong this sum of money only suffices for a small apartment with two rooms and one sitting room.

"So you see the huge demand and the investing potential, that's why the price of old houses has been soaring continuously in recent years," Yu said.

Buyer beware

A story carried in Shanghai Weekly warned of the risk involved in investing in an old house. It said the high prices of old garden houses was a kind of bubble providing no security to a long-term investor. The writer, a real estate expert surnamed Lou, said people should take more care before making such purchases.

He Fang, the Tongji University teacher, said: "I think the prices of old houses are very high these days, but they haven't become truly abnormal yet." She thinks the high prices are bound to the state of the whole real estate market, which has been soaring in recent years.

"The value of an old house not only includes the construction itself, but also its historical value and that can never be replicated," she added. "So compared with the rising prices of ordinary houses, the surge in the value of old house cannot be considered to have gone out of control."

Yu said: "The price of old houses has really hit a high level, but I don't think they are dangerous investments at the moment. The price depends on market demand. What we see is most purchasers accepting the prices."

Yu also said he expected that this year the purchase of old garden houses may fall off a bit, with investors proving more rational and mature.