Buying property in Shanghai
The largest city by population in China, the largest city proper by population in the world, a global financial centre and home to the world’s biggest container port, Shanghai can well be tagged the pulse of the Orient. Things happen there. People want to be there. And the city itself, a showpiece of the booming economy of mainland China, offers a unique blend of cultures – modern, traditional, Western, Oriental, sophisticated, fast and slick, it’s a place where innumerable international companies jostle for space at the cutting edge of global economics.
Situated where the mouth of the Yangtze River meets the East China Sea, Shanghai has plenty on the go. From historical landmarks, such as The Bund, City God Temple and Yu Garden to the breath-taking skyline, the Oriental Pearl TV Tower, the largest metro network in the world and the Maglev magnetic railway (that travels at speeds of 431km/h), Shanghai is a spectacle in itself, a glamorous, cosmopolitan and colourful experience that stretches over 6 341km2 and embraces a population close on 24 million people.
And being there is easy too. The city’s willingness to attract international business and its adaptive spirit combine with low crime levels, a wide choice of international schools, a huge expat population, and, ranked the 26th most expensive city in the world, an economy that isn’t too outrageous for a major cosmopolitan centre.
Gaining entry to the country is a little more complicated for South Africans, as Chinese visa regulations are subject to change at short notice and are notoriously difficult to navigate. Regulations and procedures regarding work and residence permits differ also, depending on each individual city’s immigration and labour processes. The good news, however, is that there are many agencies, including real-estate agencies that ably handle the entire process for clients – a boon when your Mandarin may be a little thin.
Standard requirements for work and residence in China include:
- Expats need to acquire a Z Visa before arriving.
- Holders of the Z Visa must enter the country within 90 days after the visa has been issued.
- A work permit has to be sponsored by a locally registered company in China.
- Expats need to live and work in the same location as their sponsoring company.
- A medical examination is required.
- Within 24 hours of arriving in China, expats have to complete a temporary residence form and need to apply for a working foreigner’s residence permit within 30 days.
- The residence permit allows expats to live legally in the country and is generally valid for up to a year.
A vast and varied assortment of accommodation comes hand-in-hand with the immigration services offered by real-estate agencies, but immediately it’s obvious that the vast majority of expats in Shanghai rent properties. In fact, despite the Chinese belief in property investment, many of the residents of Shanghai rent, too.
The reason, in short, is that with $1 million buying you just 46,2m2 of prime residential property in Shanghai, it’s simply too expensive, a fact with which authorities tinker. ‘The residential markets in China are tightly controlled by the government, restricting demand when the market overheats and supporting demand when the market cools,’ says Grace Wang of Savills. ‘With transaction volumes in many cities now down on average 30 to 40% year on year, the government has started loosening restrictions on a piecemeal basis, afraid that anything too dramatic might lead to an exacerbation of the imbalances that have already appeared in the market. Banks’ exposure to the residential market remains limited, with down payments on first properties in excess of 30%, second homes requiring 70% down payments, and no financing available for subsequent purchases. Key concerns remain oversupply, developer gearing and affordability.’
‘On 30 September 2014,’ publishes Colliers Shanghai Residential Research and Forecast Report 3Q2014, ‘The People’s Bank of China announced a set of new measures to ease existing mortgage conditions, the most significant being a relaxation in mortgage terms for second-home purchasers who have fully repaid previous mortgage loans. Qualified second-home purchasers will now have the same mortgage benefits as first-time home purchasers, which include a 30% minimum down payment requirement (down from 70% to 60%) and a mortgage interest rate as low as 0,7 times the current benchmark interest rate. This policy is expected to stimulate demand and provide a boost to the overall residential real-estate market. The drop in transactions during this quarter is expected to trigger greater price incentives to stimulate the market demand. Further discounts by developers are anticipated, as they attempt to capitalise on the remaining sales season in October coupled with the newly released policy.’
With many investors adopting what Colliers describes as a ‘wait and see’ attitude in anticipation of further discounts, the younger generation still cannot afford to buy property without the assistance of their parents, says Rita Poon of Asia Pacific Properties: ‘Joining the plethora of luxurious new developments, many of the properties available for rent are second-hand properties that owners find they cannot sell.’
For expats wanting to invest in Shanghai, there remain further catches. They must have lived in China and held a residence permit for at least a year in order to qualify to purchase property here. Also, by law only they are able to live in the property, meaning it cannot be rented out unless the buyer applies to start a foreign company and registers the property for commercial purposes.
- Chinese Embassy: Pretoria, South Africa, 012 431 6500, chinese-embassy.org.za
- SA Zhu Shanghai Consulate General: southafricavac-cn.com
- Asia Pacific Properties Pty: asiapacificproperties.com
- Savills Residential Sales: savills.com
- Colliers International: colliers.com