ABSTRACT Since the economic reform and opening-up program in the late 1970s, there has been a tremendous development in China’s economy, which results in a strong demand of real estate. In the late 1990s, the Chinese government implemented a series of policies to develop the national real estate industry, which has achieved a rapid growth. Nowadays, the real estate industry has become one of the pillar industries in China. Particularly in Shanghai, which is the financial center and international metropolis of China, the boom of the real estate industry has made the housing price rising sharply in the recent years. The skyrocketing housing price has become the hotspot with which most people are concerned. This qualitative study tries to outline the real estate market of Shanghai and also to explore the potential problems in the market there. This study reviews the housing reform and land system in China in order to give a general understanding of China’s real estate market. An opportunity arose in the development of the Shanghai real estate market after the abandonment of the planned housing allocation in 1998. After a decade of development, the housing price in Shanghai reached a record-breaking high level in 2009 and was to certain extent out of control, creating social problems at a consequence. It is a recognized fact that the high real estate price has made the economy of Japan falling into predicament since 1990s. In addition, the real estate bubble burst of Hong Kong and Thailand took heavy strike to their respective economies in 1997. Witnessing experiences of other countries and regions, the government should do the best to prevent the same crisis from happening in Shanghai. Based on the supply and demand analysis of the Shanghai real estate market, this study attempts to provide some potential problems in the current market. Finally, by integrating Chinese Government’s macro-control policies with experiences of other countries and regions, the study also makes some suggestions to the Shanghai real estate market, which might be useful to the policy makers as well as local residents.