Catshanghai

I have lived in Shanghai for three years and we have just celebrated our first wedding anniversary, so it’s time to buy a family home. I have a house in the UK, but it’s in a rough inner city Bristol neighbourhood that I have no plans of going back to. It’s a good old, solid Victorian worker’s terrace house, but things go wrong from time to time. Pipes leak. Boilers grumble. Cookers malfunction. It’s been a pain and expense to look after my house from half away around the world, because it is so difficult to control from such a distance.

Property prices in the UK have been increasing by insane amounts, which puts me in a good position to raise a decent amount of equity to put down as a payment towards a home in Shanghai. The idea is to have a modest mortgage that is not such a heavy burden, leaving us with plenty of choices. Should we ever decide to move away, Jenny’s family will be able to keep an eye on the house and it is much cheaper to employ a handy person in Shanghai than in the UK.

We have spent the last few weekends looking for appartments to buy in the centre of Shanghai. House prices are crazy in Shanghai too! Given that the typical local salary is just a few thousand RMB each month, property prices are totally off the scale. Costs are measured by the square metre, so expensive downtown places will sell for over 20 000 RMB per square metre. A large two bedroom appartment with have a foot print of 120 square metres will sell for about 2 1/2 million RMB or $300 000. That would take a local person on 5000 RMB a month over 40 years to earn that amount of money. Local people are forced to move to outlying areas in Pudong and Puxi where real estate prices are still under 8000 RMB per square metre. Even then, Shanghainese often need to take out lifelong mortgages and it is most difficult among families of boys, because they are expected to buy a house for the son before a man is eligible to get married.

My situation is different. I am well paid by local standards and I can use the extra capital from my house in the UK to buy somewhere in Shanghai. We want to find somewhere central where it will be cheap and quick for both of us to get to and from work. Still, there are not too many affordable places in the city centre. We have been looking around Luijiabang Lu, Xiujiahui Lu and Zhaojiabang Lu, south of Huai Hai Road where properties can be found for as little as 16 000 RMB per square metre! These are not the most elegant neighbourhoods in Shanghai, but they are going to benefit from a lot of development in preparation for Expo 2010. You can already see a lot of construction work for the new metro lines running through the city. I think that infrasturcutre development is a good sign that house prices are going to hold up in the city centre even though I fear a wider property bubble in places like Pudong’s Zobon City filled with thousands of empty units. Development may not be good news if you’re a local who is suddenly ejected into the suburbs to make way for yet another skyscraper and I hope that the essence of local community life is not as Shanghai continues to reinvent itself.

We have been looking for compact two bedroom appartments at eighty to ninety square metres and we have found some pretty decent places in the price range of 1.3 to 1.5 million RMB ($180 000 to $200 000). All of these places have been in appartment blocks with modern interiors, but they are often in working class Chinese neighbourhoods where the shared hallways and common verges may not be tiled and finished to the same extent as in Western compounds. If we went up a price bracket to 1.8 million RMB, we could get another bathroom and more elegant, spacious surroundings. We don’t need to live in a place so big. It will be expensive to heat in the winter and I don’t want to spend the rest of my life paying for a little more space.

So far, we have just been looking around to see what sort of home we can get for our money. I am still in the process of selling my UK house meaning I can not make a firm offer until the funds from this transaction come through. There is still a lot that I need to find out as I get to grips with the process of buying a property as a foreigner in Shanghai. As I find out the answers to these questions, I am going to post them on this blog in the hope that it benefits other people who are in a similar position to me.

Here are my questions. Please feel free to post answers as comments:  

• How long do foreigners need to have lived in Shanghai before they can buy a property?
• What interest rates do foreigners need to pay when buying a house in Shanghai?
• Who are the local mortgage providers?
• Do you have to finish paying off the mortgage loan before you can sell the property?
• What happens when the 70 year property lease expires?
• Do local people employ a solicitor or conveyancer to handle the legal issues associated with a Shanghainese house purchase?
• Do people buying a house in Shanghai carry out a survey?
• What are the new provisions of the property laws passed in the recent session of the CPC?