The propriety of property for outsiders

• Source: Global Times
• [11:02 July 14 2010]
• Comments

Agents and getting a loan

There are a number of expat friendly real-estate companies and, naturally, they will charge foreigners. Shanghai property owner Tom Birbeck from the UK said: "Because I had no idea what I was doing, I had my real estate agent helping me every step of the way in English. However, in addition to my estate agent taking 1 percent of the purchase fee, I remember paying a lot more in 'taxes' than I had imagined. Be careful." Like stamp duty in many countries, any foreigner or Chinese must pay a small tax when buying property in Shanghai. The fee is less than in the West and usually between 0.25-0.3 percent of the price of the property. Loans from Chinese banks are possible for foreigners but there are many documents in Chinese and these will require help from a Chinese friend. Chinese banks have different policies from the West when it comes to getting a housing loan or mortgage and this can be hard to navigate and potentially quite dangerous. According to Birbeck: "I had to take my purchase agreement which had to be already signed with the real estate agent to the bank before I could get my mortgage. It was bizarre! What if the bank had denied me? I would have been totally screwed." Jenny Wang said that this was standard procedure in China. "Most banks in China will make you notarize your contract before you apply for your loan. You don't have to do this with most foreign banks so it's worth probably going with the latter just in case you don't get it." Loans from international banks such as HSBC and Standard Chartered are available in Shanghai.

Potential pitfalls

There are many tragic stories of foreigners purchasing property in Shanghai and subsequently losing it. According to lawyer Bryan Jones this most commonly occurs when a foreign national uses the name of a local Chinese national to complete the purchase (bear in mind any foreigner can only legally own one property). This usually happens when a foreigner puts up the money, but the official title is in a Chinese national's name. Another potential problem is if the foreigner becomes unemployed - they have three to six months to find another job or their property is repossessed.

Ownership is a confusing issue; even after you have purchased your house the land is technically still owned by the government. Also, as of 1990, all residential property is leasehold and generally comes with a lease for 70 years, after which ownership reverts to the lease holder, which in most cases is the government. No one is sure yet what will happen when leases start to expire.