Everyone always dreaming of having their own house with a cute little garden in front and a small backyard at the back to enjoy the hot summer and cold winters in shanghai. In my opinion, there is nothing like sipping on your coffee and biting into a croissant while sitting on your favorite recliner placed near the fireplace.
These are all the warm luxuries that only a home can offer. But how easy is it really to find a home in Shanghai? Is it necessary for you to own a house, or can leasing just do the trick too? Is it even rational for a mediocre person with an average salary to invest in buying a home there? Or renting a decent house with a reasonable monthly rental that just fulfills one’s needs is enough?
If these are the questions that you are looking for the answers to, then read on to find as I make a detailed price-to-rent ratio comparison of the accommodations available in Shanghai.
Even with minor research, you would have found out that shanghai is one of the most expensive cities to reside in, even more than London and New York. At the time of my research, I realized that in Shanghai, the dealers charge for the land not according to a house or so but according to per square meter. And that surely says something.
That being said, we also know that most of China’s population is earning an average salary, and thus it becomes impossible for them to invest in such expensive investment opportunities.
Therefore, investment in real property is a social and political issue in Shanghai because of their too high and unrealistic prices. Therefore there have been many big projects whose main aim was to over-come this misbalance in the economy these expensive residential houses were causing. They introduced many capsule buildings which offer mini residential apartments suitable for a small family.
For those who still want to invest in buying their homes because their bank balance allows them, let me tell you what the available option for you to choose from is and how it is better off than simply renting the accommodation.
Different Types of Accommodation available in Shanghai
- An individual who has got a flexible budget can buy;
- A new luxurious house in a high rise and well-developed area
- Or an old built house in the midst of the suburban neighborhood
- Or Small flats in high rise area
- They can opt to go for furnished homes/ apartments
- Unfurnished homes/ apartments
- Serviced apartments and compounds
- Flat sharing and house sharing is also an available option
When deciding on the type of accommodation you should go for, you need to consider your family’s needs and budget. If a newly constructed and luxurious house in a high-risk area is your choice, then you should be ready to pay its related high cost too.
After a detailed survey, I concluded that even small apartments in high-rise areas cost more than huge houses in a suburban neighborhood.
Whether to buy a furnished or an unfurnished house is wholly your choice to make. Still, a thing to consider when buying a furnished house or an apartment is doing the inventory to be well aware of the prices you are being charged for each piece of furniture.
You can also opt to go for a serviced apartment, which in my opinion is the best choice only if you are planning to stay there for a short interval. The services they include are housekeeping, cleaning, and cooking, and regardless of their high price, this service is still in high demand.
Students have an option to enjoy the luxuries of a high-end society without having to pay the huge rent all by themselves. Flat sharing is a very common practice amongst students there.
Before You Proceed;
Know your needs so that it becomes easy to communicate and talk it through with your agent. I would recommend jotting it down on a paper beforehand and discussing it with the agent who helps you find the house. Only when you specify your requirements in terms of must-haves and things you can miss out on in a house would you be able to get a home that’s not too overly priced and that best suits your needs too.
For instance, for some people, a balcony that overviews the neighborhood is a must. For others, a wide window in their living room to accommodate light and brightness in their daily lives is a characteristic they would not want to miss. Similarly, the location of bathrooms and kitchen is also a concern point for buyers. Therefore a clear picture of what you desire and expect from your accommodation is necessary before going on for a house-hunt.
How to Find an Accommodation Best Suited to Your Needs in Shanghai?
Property in Shanghai is easily available online, although not all the best deals can be found there. Therefore, it becomes important to first survey the market through ads in the newspaper or by asking around from friends and acquaintances. Dealers and agents may be a good option, but it’s not advisable to highly depend on the deals they are offering as they may be charging you high considering you have little knowledge about the rates. Therefore it is important to survey the market and take notes of the rates before making the final payment. Also, conveying to them beforehand about your budget’s flexibility, the location you want the accommodation in, and the proximity to the transport route is important.
Following are some ways you can avail accommodation in Shanghai;
1. Short Term-Lease
As you may know, leases may be short-term and long-term, depending on what is stated in the contract. If you ask me, I would say that making a short-term lease is a much better option than paying monthly rentals, as it will cost you much more in the long run. Short-term leases are usually valid for 12 months period. It is advisable to negotiate for the lease rentals as it is a very common practice to negotiate for China’s price. If you are not a native there, you need to get the contract ready in two languages to better understand and get a translator who can make you understand all the professional terms in simple language.
Once you do a shift in your new accommodation, you will have to register yourself with the local public service bureau.
When making the budget for your new home, keep in mind the commission of your agent. At the time of the contract, you will have to make payment in cash and pay 2-3 months rentals in advance, so be prepared and have the cash ready with you.
The utility bills are payable in arrear fashion by the tenants. The official individuals usually come to read the meter for electricity and gas and get your bills ready accordingly. But it is still advisable to talk with your agent about this beforehand too.
2. Long Term-Lease
It is similar to a short-term lease in all aspects except that the accommodation in Shanghai can be transferred to you at the end of the long-term lease. So it is basically you buying a house but in annual installments. It has got an annual interest rate, too, so you will be paying an annual installment as well as annual interest.
The Better off; Rent or Buy?
To decide on this, we would have to consider the price-to-rent ratio, which states how much it costs to buy a house over how much it costs to rent it. To do that, we follow the following formulae, which are a very useful tool and can be used to compare the houses’ different prices in different cities.
Taking this further, the price to rent ratio in New York City as of March 2019 was calculated to be 36.83 and 50.11 for San Francisco. When I sat to do my own calculation for the houses in Shanghai using the rents available on the Anjuke page taking two-bedroom apartments in my ratio calculation, I got an unbelievably high price to rent ratio of 81 for the Shanghai city as a whole.
You can do your own set of calculations before investing by putting the rentals into the equation that your agent quotes you.
The figure of 81 for the price to rent ratio in shanghai is calculated as follows,
- The average monthly rent for a two-bedroom apartment was 5,165rmb
- Annual rent (monthly rent x 12): 61,980rmb
- Average sales price per square meter: 50,278rmb
- The sales price for 100 square meter apartment: 5,027,800rmb
How realistic are these numbers?
The fairness of these numbers is quite arguable. That is because the rental for a 100 square meter house can vary and go much higher than the average 7,846rmb we put into our calculation. Suppose we double it and make it 15,000rmb, thus changing the price-to-rent ratio to 54.52. It is higher than any other expensive considered cities in the world, New York and London.
Is It Affordable for an Average salaried Person in Shanghai?
No. It’s not. Hence the chaos that has been trending as buying accommodation in Shanghai has become a social and economic issue. Therefore, the government has taken serious action and is facilitating Shanghai’s population by building a huge amount of affordable houses.
If you come with a business mind and are looking for investment opportunities, consider investing in property in shanghai. The prices are increasing tremendously in real estate in Shanghai, and the property that you buy start yielding profit within no time. However, if you are earning just an average salary per month, or are simply looking for a reasonable place to stay in, it is rational of you to just rent accommodation there as they are highly friendly on the pocket and affordable too.