Houses in Shanghai are expensive primarily due to a combination of economic growth, limited land availability, and high demand. Shanghai, as a global financial center and a major metropolis, has experienced rapid economic development over the past few decades. This growth has attracted a large influx of residents, both domestic and international, seeking employment opportunities and a higher standard of living. The limited land supply in the city, coupled with the high demand for housing, has driven up property prices significantly.

Data from the Shanghai Municipal Bureau of Statistics shows that the average price of residential properties in Shanghai has been on the rise since 2010. For instance, in 2010, the average price was approximately 21,000 yuan per square meter, while in 2021, it reached around 70,000 yuan per square meter. This represents a significant increase of over 230% in just over a decade. The high demand for housing in Shanghai is attributed to several factors:

1. Economic Growth: Shanghai's robust economic performance has attracted a large number of companies and professionals, leading to a surge in population growth. According to the Shanghai Municipal Bureau of Statistics, the city's population increased from approximately 18.7 million in 2010 to over 24 million in 2021.

2. Limited Land Availability: Shanghai is a coastal city with limited land resources. The city's expansion is constrained by its geographical boundaries, making it challenging to accommodate the growing population. This scarcity of land has led to increased competition for available properties, pushing up prices.

3. Investment Attraction: Shanghai's status as a global financial hub has made it an attractive destination for foreign investors. These investors often purchase properties as a long-term investment, further driving up demand and prices.

4. Government Policies: The Chinese government's policies, such as the "household registration" system (hukou), have also influenced the housing market. The hukou system restricts residents from certain areas from accessing public services, including education and healthcare, in other regions. As a result, many individuals and families are willing to pay premium prices for housing in cities like Shanghai to secure better opportunities for their children.

In conclusion, the high cost of houses in Shanghai is a result of a complex interplay of economic growth, limited land availability, and high demand. These factors have created a highly competitive real estate market, where prices have soared over the years.