Things in Shanghai move very fast, but the housing and real estate market is still very young. The idea of the “professional landlord” in Shanghai is relatively new to the last 3 years, and service is a quality all but lost on most local landlords.
To navigate through Shanghai ‘s often nonsensical rental market please familiarize yourself with following tips and guidelines. It will help jump start your understanding of the rental market and its conditions..
Shanghai’s Rental Market Conditions and Standards
The fast growth of Shanghai ‘s real-estate market over the past 2-3 years saw a drought of high-quality western style property ( USD2,000+) and an ever increasing demand. The general lack of ‘service standards’ in China coupled with an insufficient number of high-quality properties often left tenants with little leverage when negotiating as many landlords adopted the “take it or leave it” mentality. Now, as the market is cooling down, landlords have been forced to pay more attention to renovation and service. Still, good property is a hot commodity and it moves fast.
It is also important to understand that higher budgets of 5-10,000USD do not guarantee state of the art or “real” western style/quality renovations. 3 years ago, before foreigners were allowed to buy property, Local Chinese, HK developers or the Chinese Gov were the only ones renovating. Unfortunately their style and quality never really quite hit the mark. Western taste is most often misunderstood and as a result superficial or cheap renovations common.
Today foreign and local landlords all compete for the same higher-budget foreign tenants and the quality of overall renovation is improving slowly but steadily.
Shanghai Housing spends a lot of time sorting through average properties looking for the best, and we spend a lot of time on consulting with good landlords on proper renovation quality and western style. A lack of premium stylishly designed property (especially Colonial Property) in downtown Shanghai still remains. You should anticipate settling for minor quirks or prepare to pay a premium for unique, well renovated property.
Shanghai Rental Terms
Average Rental Terms
Lease terms are typically 1 year with an option to renew for a 2nd year. Renewing for a 2nd year usually requires 2 months prior written notice. If you would like to renew for a further term, a new contract should be entered into. Most landlords will not sign short term leases of less than 1 year.
Rental Quotes and Payment
Shanghai Rental prices are quoted in either USD or RMB per month but payment is made in RMB. The exchange rate will be clearly stated in the contract. The rent quoted typically includes the management fee but not the 5% rental tax (required for an official receipt). Rents are required in advance of the following month. Rental payment is paid monthly and is due the day you move in and the same time each month after that.
A management fee is charged on top of rent and covers the cost of building maintenance, security and the general upkeep of facilities. The more facilities offered in a complex (e.g. pool, tennis court, etc) the higher the management fee. Management fee’s are usually only required for service apartments and high-end new apartment complexes. Private landlords do not usually ask for Management fees. Most management fees are included in the rental price quotes but the landlord should clearly state how much you are required to pay.
A standard security deposit is held for “compliance with the terms of the lease agreement”. Typically the security deposit is equal to 2 or 3 months of the total rental (including management). The security deposit should be returned after the termination of the lease, without interest. Some landlords will try and deduct $$ from the deposit should there be any damage to the property other than normal wear and tear. However the security deposits are generally returned. There are no ‘Key Money’ fees in Shanghai .
Offer Letters and Holding Deposits
Once the general terms of the lease have been agreed upon an initial “Offer Letter” and a holding deposit are required. The Holding Deposit should be an amount equal to one month’s rent (management incl). On the signing of the formal tenancy agreement this is used as the first month’s rental. Typically, the holding deposit is not refundable if the tenancy agreement fails to be signed.
Official Rental Receipt and Rental Tax
The Shanghai Gov. requires that all landlords pay a 5% tax on rental income. Landlords often try to pass this tax on to the tenant and exclude the cost from the rental quote. If your company is paying your rent they WILL require an official receipt so it is important to confirm if an official receipt is included in the rental fee.
Utility costs of phone, gas and electricity, water and satellite are payable by the tenant.
there are no legal services or lawyers required to sign a lease agreement in Shanghai . Should either party request legal counsel they will be responsible for covering their own costs.
Agency Service Fee
Tenants do not usually pay a service fee on Rental Property in Shanghai . The Service Fee is paid by the landlord, however this always depends on the value of your contract and the agency that you are working with.