STEPPING out of Plaza 66, one of Shanghai's most high-profile office blocks, 28-year-old Claire Lin, clad in a pricey wool blazer and carrying a designer Coach bag on her shoulder, hopped on a No. 20 bus heading for Zhongshan Park.

Just a few months earlier, the assistant marketing manager at a Hong Kong-based real estate firm would have flagged a taxi after a long day's work without a second thought.

"I've become much more cost-conscious since my husband and I finally decided to buy an apartment of our own," Lin explained.

Their wedding banquet with family and friends, a ritual in China that is held after a registry office marriage and formally seals a marital union, is scheduled next year.

"We have to get everything - most importantly a home - ready by then," Lin said.

George Li, Claire's husband, agreed.

"Home prices in Shanghai are really high," said Li, 30, a sales manager for a US pharmaceutical company. "But for us, an apartment of our own is still a must. We now go to less expensive restaurants and rely mainly on public transportation in order to save as much as we can to pay for the mortgage."

In June, the couple purchased a 95-square-meter, two-bedroom apartment near the Shanghai Railway Station for about 2.5 million yuan (US$366,000).

Thanks to financial help from both families and some deep digging into their own pockets, Lin and Li finally pulled together the 900,000 yuan for a down payment and negotiated a 20-year mortgage for 1 million yuan from a commercial bank at 4.16 percent interest.

For the remainder, the couple turned to the city's housing fund program, applying for a 600,000 yuan mortgage.

About 80 percent of first-time home buyers in Shanghai apply for mortgages from the public housing fund, which offers more favorable lending rates than commercial banks, according to a survey of 2,000 home buyers by the Shanghai Provident Fund Management Center, the local watchdog for the public housing fund.

In Shanghai, a family with at least two people covering repayments is now eligible for as much as 600,000 yuan from the public fund, and those with extra financing available may get a maximum loan of 800,000 yuan. The interest rate is 3.87 percent.

People covered by the housing program pay 7 percent of their monthly salary to the fund, and their employers are required to match the amount. Employees may also pay an extra 1 percent to 8 percent of their monthly salary to the fund, requiring additional matching funds from their employers.

Fund members up

A mid-year report released by the fund management center showed that more than 3.6 million people employed in 88,000 companies in Shanghai paid into the public housing fund on a regular monthly basis between January and June. There's been a steady increase in those figures, the center said.

And in the case of Lin and Li, while monthly mortgage payments from both the public housing fund and the commercial bank should be nearly 10,000 yuan, the couple actually pay only about 7,000 yuan a month because their existing housing fund accounts cover almost 3,000 yuan.

"While 7,000 yuan may not seem like a very big burden to us at the moment, it accounts for about one-third of our monthly income," Lin said. "We want to pay off our mortgage ahead of schedule, probably within no more than 15 years. Therefore, we've decided to cut all unnecessary expenditures such as fine dining and taxis so we can save as much as possible."

Robust demand from newlyweds and families upgrading living quarters and a rapidly increasing number of property investors from Shanghai, other Chinese provinces and overseas has been driving the city's housing market higher for more than half a year.

Sales of new homes, excluding those built for relocated residents under the city's redevelopment programs, reached 13.8 million square meters during the first nine months of this year, almost double from a year earlier, according to the Shanghai Uwin Real Estate Information Services Co.

Home prices rise

The transaction volume of new homes costing more than 25,000 yuan per square meter jumped 107 percent to 1.64 million square meters during the first nine months. About 426,000 square meters of new houses, all costing above 40,000 yuan per square meter, were sold across the city during the same period, a year-on-year growth of 164 percent, Uwin statistics showed.

Meanwhile, average price for new homes rose to 15,063 yuan per square meter in Shanghai in the first three quarters of this year, an increase of 7 percent.

"The release of pent-up demand, which was initially driven by lower prices after last year's slump, helped prop up the market initially in March," said Xue Jianxiong, an analyst with E-House (China) Holdings Ltd.

"Later on, abundant liquidity together with ever-growing expectations of higher home prices further boosted home sales in the city, with more investors being lured into the market."

A massive drop in property prices triggered by the global credit crisis hit Shanghai in mid-2008 and didn't begin to turn until February, abetted by a hefty government economic stimulus program and record bank lending.

In the first nine months of this year, banks in China extended a record 8.67 trillion yuan in new loans, far eclipsing the 5 trillion yuan target for 2009 set by the central government.

Wei Jianing, an analyst at the Development Research Center under the State Council, estimated earlier that about 20 percent of new loans issued in the first half, or around 1.47 trillion yuan, might have been channeled into the nation's property and stock markets, creating worries over asset price bubbles.

However, nobody knows when the bubbles, if they exist, will finally burst as housing prices keep rising. And many young couples aren't willing to chance being priced out of the market.

The apartment Lin and Li bought in June has been recently reevaluated at nearly 2.8 million yuan, or a 10 percent price increase within just four months.

"This could be good news for investors," Li said. "But for us, we don't think we will make any money out of it because it's the only place we have to live."