• Buying Property in Shanghai: The Basics You Need To Know

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    buying-property-shanghai

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    Shanghai is the financial hub and Chinese city that has deserved the most attention in the past decade.

    There are not many articles covering the topic how foreigners can buy property in Shanghai, so I decided to write one myself.

    In this one, you’ll learn more about regulations to foreign ownership, Shanghai’s property market, average prices, popular real estate agents and more.

    Can foreigners buy property in Shanghai?

    I’ve already written a complete article explaining how foreigners can buy property in China.

    Even if regulations are similar on a national level, prices have soared in Beijing and Shanghai, which has resulted in some additional requirements. Below I’ve listed some regulations to foreign ownership in Shanghai that are worth noting.

    How many units can I buy?

    You can buy one unit, after you’ve worked or studied in China for a time period of a year. This applies to the whole of China and understandably, you need to provide a number of documents to prove so:

    • Employment contract and tax records
    • Local work permit
    • Resident permit

    The documents should be issued at least one year ago, additional documents might be requested.

    Buying from developers and real estate agents

    You can buy both established and off-plan property, directly from sellers, developers or real estate agents. This is not the case in some Asian countries, in Australia for example, non-resident foreigners can only buy off-plan and in Indonesia you can only buy directly from developers.

    Can I rent out property in Shanghai?

    Foreigners aren’t allowed to rent out property and act as landlords, the property should solely be used for dwelling purposes.

    What property types can I buy?

    You’re allowed to buy anything from condos, apartments and houses. But you can’t own the land that the house is built on, it can only be leased for a time period of up to 70 years.

    Can I buy residential or commercial property?

    You can only buy residential property as a foreigner. You need to be careful when buying as some developers have used commercial land for residential projects.

    Previously, the government has looked between its fingers as extra tax incomes have been generated from developers who utilize the land. However, due to an overheated market, the government has started to clamp down on this issue and even tried to force buyers to leave their apartments.

    The same it goes for land with dual-use, which simply means that the land can be used for both residential or commercial purposes, but where the government has tried to to force owners to use the property for commercial purposes solely.

    Property tax in Shanghai

    Due to hefty price increases, the government has tried different pilot projects and introduced property taxes, which is usually not levied.

    In Shanghai, a pilot project started in 2011 where non-resident and resident second home buyers (buying over a certain size) were taxed with a rate of 0.4% – 0.6% on 70%, of the original value.

    Down payments

    New regulations don’t apply to foreigners, but to local second home buyers. Banks in Shanghai generally require a downpayment of 70% for second time purchases where the size exceeds 144 square meters, or cost more than RMB 4.5 million.

    This is considerably higher, as down payments for second homes is usually set to 40%.

    It’s easier for Shanghainese to buy locally

    Not related to foreign buyers, but also worth mentioning:

    As I explained in my complete guide about buying property in China, the Chinese hold a “national passport” referred to as Hukou (户口本). Simply speaking, Hukou’s were introduced to control urbanization, if you’re born in Shanghai and have a Shanghai Hukou, you’ll have a number of benefits compared to a person with a different Hukou.

    For example, if you come from a smaller city in a different province, it will be generally harder to work or buy property in Shanghai. If you don’t hold a Shanghai Hukou, or local residence permit, you have to pay taxes in Shanghai for a time period of five years, instead of two years, which was the regulation before.

    Shanghai property market

    shanghai-property

    After living in Shanghai for some years, I’ve witnessed how property prices have surged and become unsustainable.

    Even if I believe that Shanghai will perform well in the long term, it’s not the right time if you look for investment property. There are better options in a number of countries in Southeast Asia.

    The fact is that the Chinese economic growth has been slowing down the past years, the same it goes with the property market in Shanghai, which has started to cool off. The government understands that locals are priced out and are putting much focus on letting developers build more rental units. Big projects are planned.

    Many talk about how the purchasing power of the Chinese has increased, sure it has, but unreasonably propped up prices is one the major reason why locals have become wealthy the past 5-10 years.

    Some info worth paying attention to:

    China’s debt has increased almost eight fold, from around RMB 5 – 40 trillion, during a time period of just 10 years. House loans are a big contributor.

    Sure, Japan has a similarly high debt burden, but that’s been accumulated over a much longer period of time. There’s not been a single country where debt has increased so much, during such short period of time. Debt is one of the reasons why China has seen massive growth in the past decade.

    Keep in mind that China’s economy is slowing down, but a couple of larger cities on the East/Southern coast, like Shanghai and Shenzhen, might reach similar standards to Western countries in the long run.

    Shanghai real estate prices

    Prices have increased massively the past years, in fact, in some areas in Shanghai prices have increased as much as 20-40% – in a time period of a year.

    There are clear incentives why younger Chinese look for rental property and to invest in other instruments, like crypto currencies or stocks.

    Below I’ve included a list with a summary of average prices in different areas:

    For rent

    1 bedroom apartment in the city center: around RMB 7000 / month
    1 bedroom apartment outside the city center: around RMB 3700 / month
    3 bedroom apartment in the city center: around RMB 20.000 / month
    3 bedroom apartment outside the city center: around RMB 7700 / month

    To buy

    Price per square meter in the city center: RMB 100.000 / square meter
    Price per square meter outside the city center: around RMB 47.000 / square meter

    Real estate agents

    You’re not required to hire a solicitor in China, usually a real estate agent will help you through the process. It’s important that you find a real estate agent that speaks English and has a proven track record of helping foreigners.

    Some of the most popular real estate agencies in Shanghai are:

    • Joanna Real Estate
    • Max View Realty
    • Fullhome Real Estate

    Conclusion

    Regulations to foreign ownership is fairly similar in Shanghai compared to other parts of China. Some pilot projects have been introduced to levy property taxes, to cool down the market.

    Prices have increased much the past decade, housing loans is a major contributor, and a reason why the government has introduced a hefty downpayment requirement for second home buyers, set to 70%.

    If you decide to buy investment, there many other places in Asia that will bring you greater yields. To learn more about buying property in Shanghai, I recommend you to read the whole article.

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    4 Responses to “Buying Property in Shanghai: The Basics You Need To Know

    1. john at 4:45 am

      hello marcus, i am john from bulgaria lived in shanghai 14 years and bought 2 real estate, real estate one is on my name another one is on my chinese wifes name.

      soon we plan to divorce, my question is ; after divorce if i want to sell my property can this make me problem to sell it as a single divorce foreigner or can sell easily when ever i want ?

      or should i sell this property before we divorce officially ?

      hope to hear soon from you,

      regards,
      cem

      1. Marcus Sohlberg at 3:40 am

        Hi John,

        I would be surprised if you came across any issues as you already bought the apartment, you’re not a new buyer.

        Still, I highly suggest you to contact a law firm in Shanghai and see what advice they have for this matter.

    2. BARRY BOYCE at 12:14 am

      Hi Marvus. You mention in your article that you like some other countries better than china/ shanghai for investment. Can I ask Which countries are they?

      1. Marcus Sohlberg at 10:23 am

        Hi Barry, the buying regulations are unfavorable and real estate expensive, from my point of view. If it wasn’t for personal reason, I would buy in Vietnam, Malaysia, Thailand, Japan, and others instead.

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