Shanghai

Buying Property as a Foreigner

Foreigners can purchase apartments or villas in Shanghai as long has he/she has worked or studied in Shanghai for at least a year. The individual must provide documentation to this effect, for example, a current work contract that dates back a year or more. The only legal restriction on foreigner purchase is that only one apartment or villa can be purchased in a two-year period. Most foreigners who buy property in Shanghai are doing it through their companies or it is done by a local Chinese agent for the company.

This is China, so caveat emptor (Let the buyer beware). However, Shanghai is a sophisticated international city and 20 years have passed since foreigners first began to purchase property here. Use a reputable real estate agent and bank, because both of them will investigate your property for you, which will significantly reduce any risk in your purchase.

Financing

There are no Western-style mortgage companies in China – the banks make the property loans. There are two financial avenues open to a foreigner wishing to buy a property in Shanghai:

1. Foreign Currency Loans: Only foreign banks (based in Shanghai) can provide these and then, only to foreigners, not locals.
2. RMB Loans: both local and foreign banks can provide these.

The applicant should provide the following in order to be considered for a loan:

• You need to have a Z-visa. If you have any other type of visa, you will not be permitted to buy property. If a bank does allow you to purchase property with another visa type, they will then be able to, and probably will, cancel your loan in the near future and keep the lion’s share of your deposit as a penalty for voiding the loan.
• Proof of identification (e.g. a passport or residence permit). One or both of these documents should have a photograph of the holder and should attest to the fact that (s)he has been living in China for over a year.
• Proof of income (e.g. bank statements, work contract). These, too, must date back at least one year.
• Housing purchase contract or letter of intent. This is any written agreement cosigned by the current owner to confirm that both parties have agreed on the terms of the sale of the property.
• A detailed list of all the applicant’s other mortgaged or pledged properties (including a certificate of ownership/title deed for each one).
• A certificate of appraisal for the mortgaged property issued by an authorized department. This can be, for example, a notary like the Shanghai Municipal Notary office.
  Shanghai Municipal Notary Office
  1/F, 660 FengYang Road
  Tel: +86 21 6215 4848
• Written consent from the guarantor as well as his (the guarantor’s) credit standing certificate.
• Any other materials required by the lender. This varies from bank to bank and can include documents like marriage certificates or national credit reports.

As a rule, the more documentation you can provide, over and above what is listed here, the more likely you are to secure a mortgage.

The Purchasing Process

Foreigners who wish to purchase an apartment in China will first need to establish residency for a period of no less than one year. Residency can be proven by submitting work contracts or other official documents.

You will need a real estate agent, but not a lawyer for the purchase process. Real estate agents list every type of property: commercial and residential. Among the residential properties listed are: Townhouses, Villas, Serviced apartments, Apartments, Semi-detached houses, Detached houses. It should be noted, however, that while all these types of housing can be listed, the most common types of domicile remain apartments (serviced and non-serviced) and villas.

The only drawback to using a real estate agent to help you find housing is the commission that you will have to pay once you have signed a rental agreement. Other than that, it is highly recommended to use agents in your search for housing as they not only understand the Chinese culture in terms of bargaining and Guanxi (relationship-building), they will also have a host of properties in their database for you to choose from as well as a keen knowledge of the city. Real estate agents can also provide after-sales services and act as an intermediary between you and the landlord (who, chances are, will not speak English).

Normally, you will have to make a cash deposit of at least 30% of your agreed-to purchase price in order to receive a mortgage. China has not yet adopted procedures for measuring and reporting credit worthiness and therefore, a hefty down payment is required.

From the experience of many expats in Shanghai, you should also enlist the aid of a Chinese friend or family member whom you entirely trust and who has an excellent understanding of the negotiating games of the market. Some even advise paying a visit to the local urban planning division (Tel: 23111111; Address: 200 People Avenue) to first ascertain that the government has no foreseeable plans to, for example, build a new highway through your new apartment six months after purchase. The apartment will also have to be thoroughly inspected for construction quality and an absence of structural problems.

It is prudent to make your arrangements with the bank for the loan before you or your property agent begins to negotiate with the property owner. Agents will probably require a “good faith” deposit of anywhere from 5,000 to 10,000 RMB before making an offer. If the offer (or counter-offer) is not accepted, the agent will return the deposit. Once a final purchase price has been agreed to, the buyer will transfer the 30% deposit to the seller and both will sign a binding property contract.

At this point, if the buyer backs out of the deal, he would lose the deposit — if the seller pulls out, that act would cost him double the deposit. As the 30% deposit must be paid before the mortgage can be applied for, it is obviously imperative that the buyer first make sure that there will be absolutely no problems whatsoever in obtaining it. New properties qualify for up to a 30-year mortgage, while previously owned apartments cannot be mortgaged for more than 20 years.

The mortgage application process for foreigners requires a lot of legwork and documentation, including a visit to the notary of the public along with a representative from the bank. There will be various administrative and insurance fees that usually do not exceed 10,000 RMB and a property tax of 1.5% will be due at this time. Luxury apartments (houses), with a square meter price over 17,500 RMB will cost you an additional 1.5%.

After all the paperwork is completed, the buyer receives a key to the apartment, the realtor receives a total commission of 2% of the purchase price paid equally (1% each) by both parties, utilities are then transferred to the buyer’s name, and, theoretically, the deed should also be transferred at this time as well. At this time, a copy of the key is handed over to a contractor, who will then begin the process of “decorating” the apartment – this stage might take 4-6 weeks.

Then you can order the fireworks and move in!

Real Estate and Relocation Agents in Shanghai

The following estate agents offer a combination of real estate and relocation services for expats. Each agency is bi-lingual.

• Shanghai Properties, http://www.shanghaiprops.com
• Autumn Leaves, http://www.autumnleaves.com.cn
• Metropolis, http://www.metropolis-sh.com