Property agents in Shanghai have come up with a novel way of giving house buyers important information about the home they intend to buy. Ask them about neighbourhood construction plans for malls, motorways and high rise appartments and they may take you to the third floor of the Urban Planning Museum in People’s Square. There lies the model of the grand plan of the city centre for Expo 2010.
Western countries have turned the house buying process into a fine display of bureaucratic legalese involving building surveys, searches and contract writing. The transaction can take several months especially if there is an interconnected chain of several buyers and sellers all waiting to complete.
On the surface, Shanghai makes it easier and cheaper for house buyers. Instead of hiring expensive conveyancing lawyers to carry out searches, you and your agent can go to the museum to do it yourselves. There are no building reports so you are basically buying the house as it is seen. There is a contract, but this is prepared by the property agent before the transfer of ownership is ratified by the Shanghai Real Estate Exchange Centre. In theory, you can buy the house very quickly as long as you have the cash, mortgage and documents already arranged. Foreigners need to cough up a 30 percent down payment and prove they have lived in China for a year. Foreign home buyers are not allowed to sublease the property, but there is no requirement to hire an attorney. It is probably a good idea to employ a qualified Chinese legal professional to check the contract before you sign away your soul, but there are not yet many safeguards to protect home buyers.
This takes us back to the bizarre scene on the third floor of the Urban Planning Museum as we tried in vain to map the location of the model to the house that grabbed our attention. Whilst we trust the integrity of the museum’s model makers, we feel this is not a water tight method for deciding whether or not to buy a house. It may be a welcome notion that the Shanghai real estate market is not yet bedevilled with the bureaucratic hurdles that slow down the process in other countries, but the safeguards are also absent. Those of us with local friends and family are lucky to have someone to guide us through this minefield.
Meanwhile, city centre house prices have increased by several multiples in just a few years. Properties in Huangpu are currently selling for 13,000 to 20,000 RMB per square metre while local salaries are still only a few thousand kuai each month. Accommodation is becoming increasingly difficult to afford unless you move to the sticks. Is the housing boom set to slow down or go bust after 2010? Will Shanghai become one of the most expensive places to buy a house in Asia?
All the uncertainty of buying a Shanghai home in the current climate is ultimately no different from walking into a casino with a set of prayer beads.
Crossposted on www.catshanghai.com/blog.
Photo by caffeineguy.