shanghai housing market insights 2013 · 3/28/2013 · cluster of luxury serviced apartments, such...
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RESIDENTIAL RESEARCH
Shanghai Expatriate housing Market Insights 2013
EXPATRIATE COMMUNITIES
IN SHANgHAI Page 3
RENTAL TRENDS Page 4
MARkET TRENDS Page 6
COMMON PITFALLS Page 7
CORPORATE HOUSINg ALLOWANCE REVIEW
Page 9
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Shanghai remains one of the primary destinations for expatriates in China due to the growing presence of multi-national companies with its position as the commercial and financial hub of China. The expatriate population in Shanghai, the majority of which are home renters, grew rapidly in the last two years. According to the latest national census conducted in late 2010, the city’s total number of expatriates (including those from Hong Kong, Macau and Taiwan) reached 208,602, an increase of approximately 48% compared with 2008, putting the city at the top of the list for the largest expatriate population in China. With the global financial crisis waning and inflationary pressures in Hong Kong and Singapore, the inflow of expatriates to Shanghai has bolstered the expatriate housing market, which pushed up both rents and occupancy rates in 2011 and 2012. However, the absence of a centralised listing system for agents and proper market practice standards has contributed to a variety of challenges. As one of the leading companies providing expatriate housing services, Knight Frank is at the forefront addressing these challenges, advising clients on future rental trends, emerging areas and the evolving commercial practices. To summarise our market observations and experiences, Knight Frank has produced Shanghai’s Expatriate Housing Market Insights 2013. This guide highlights the most popular housing areas for expatriates (P03), rental trends (P04), market trends (P06), common pitfalls (P07) and changes in corporate housing budgets (P09) concerning expatriate home
background
Expatriate population Number of international schools Expatriate housing
02 03
Shanghai expatriate housing Market Insights 2013
Market snapshot:90,000, 43.2% of the
total expatriate population in Shanghai
26, 55.0% of the total number of international schools in Shanghai
Apartments and villas
GREATER HONGQIAO
Market snapshot:30,000, 14.4% of the
total expatriate population in Shanghai
14, 30.0% of the total number of international schools in Shanghai
Apartments and villas
dECENTRAlISEd pudONG
dONwTOwN puxI & pudONG
Market snapshot:
26,000, 12.5% of the total expatriate population in Shanghai
7, 15.0% of the total number of international schools in Shanghai
Apartments and lane homes
· Nanhui
· Lujiazui· Jing’an · Xintiandi
· Former French Concession Area
· Gubei· Hongqiao
· Minhang
· Qingpu Xujing
· Longdong· Huamu
· Jinqiao
Expatriate communities in Shanghai
For the purpose of this report, Knight Frank categorises expatriate communities in Shanghai into three distinct areas: downtown puxi & pudong, Greater Hongqiao and decentralised pudong.
As the most popular – and therefore most expensive – area, downtown puxi & pudong is characterised by its density of both residential and commercial buildings with convenient access to public transportation networks. Key areas in the downtown area include Jing’an(particularly Nanjing West Road for its commercial life), the Former French Concession Area (mostly noted for its tree-lined streets and historical homes) and Lujiazui, which has sprouted a number of the city’s top luxury developments to cater to the housing needs of employees in the financial services sector. The Greater Hongqiao area comprises Hongqiao, Gubei, Qingpu Xujing and parts of Minhang, each with distinct characteristics. Hongqiao and Gubei were the first permanent expatriate communities established in Shanghai, underscoring their well-developed service infrastructures. Qingpu Xujing Town is an established luxury villa area with a sizable population of expatriates. Minhang is a popular community, due in large part to the concentration of international schools in the area. decentralised pudong features more green space and large golf courses, plus the manufacturing, R&D and high-tech zones of Zhangjiang and Jinqiao has attracted a significant expatriate presence alongside some of the best international school options. The decentralised Pudong area includes Huamu and Nanhui, areas where we find a high concentration of houses, furnished apartments and villas built primarily for expatriates.
Key
Source: Knight Frank Research
GEOGRApHIC COVERAGE: HONGQIAO, GuBEI, QINpu
xuJING ANd MINGHANG
GEOGRApHIC COVERAGE: JINQIAO GREEN CITY, lONGdONG
AVENuE, HuAMu ANd NANHuI
GEOGRApHIC COVERAGE: FORMER FRENCH CONCESSION AREA,
xINTIANdI, JING’AN ANd luJIAZuI
04
Downtown Puxi & Pudong
Geographic coverage: Former French Concession Area, Xintiandi, Jing’an and Lujiazui
Apartments
Villas
Key drivers/characteristics: • Higher rental packages more common
• High accessibility by metro lines
• Close to the city’s central CBD and commercial areas
• The building ages for most rental properties in downtown Puxi range from 10 - 20 years and in downtown Pudong ages range from 5 - 10 years old
• High density of amenities (retail, food & beverage and hotels)
• Major tenants are singles and couples with children less than 3 years old
Figure 2 : Rentals and vacancy rates of apartments in Downtown Puxi & Pudong
Source: Knight Frank Research
Former French Concession
Lujiazui Jing’an Xintiandi
Shanghai expatriate housing Market Insights 2013
Rental analysis by locationRentals of expatriate housing vary largely depending on the location, quality, accessibility, length of stay, services provided and the reputation of the property management.
Our rental index shows that rents in Downtown Puxi & Pudong commanded the highest levels among major expatriate housing areas in Shanghai, with average rent reaching RMB189 per sq m per month. With such fast-paced growth in the area, rents in Decentralised Pudong surpassed Greater Hongqiao rents back in 2008. The trend has continued and rents in Decentralised Pudong reached an average of RMB164.9 per sq m per month in 2012. With limited leasing supply for expatriate housing in the past two years and most properties being older than 10 years, rents in Greater Hongqiao decreased to RMB139.6 per sq m per month in 2012, down from RMB158.1 per sq m per month in 2006.
In the luxury apartment segment, the Lujiazui and Xintiandi areas recorded the highest rents in Pudong and Puxi respectively in 2012. In Lujiazui, the cluster of luxury serviced apartments, such as IFC Residence, Fraser Suites and Marriott Executive Apartments, pushed up the average rental to RMB30,000-50,000 per month. In Xintiandi, four-bedroom apartment units gained popularity and achieved the highest rental rate in Shanghai, ranging from RMB 55,000 to RMB 65,000 per month. Studio apartments in the Former French Concession Area and Jing’an had lower rental rates than those of other areas as most units in these two areas belonged to individual owners instead of developers. The Hongqiao area and the Jinqiao Green City area generally command similar rental levels, closely followed by Huamu where new high-quality residences have been or are being developed.
In the villa segment, most villas in Shanghai are clustered in Greater
Hongqiao and Decentralised Pudong and are designed with three or four bedrooms with sizes ranging from 200 to 550 sq m. The Hongqiao and Gubei areas in Greater Hongqiao and the Jinqiao Green City area in Decentralised Pudong record the highest rents among the sub-areas, reaching RMB40,000 to 70,000 per month, whilst the rental rates in Qingpu Xujing and the Longdong Avenue area were lower due to their longer distance to centralised areas.
0504
Decentralised Pudong
Geographic coverage: Jinqiao Green City, Longdong Avenue, Huamu and Nanhui Apartments Villas
Key drivers/characteristics: • More competitive and lower rental packages offered
• Renowned international schools have considerable influence on leasing demand
• Excellent landscaping often marked with exposure to Century Park
• Most rental properties are new and are built in higher quality with an average building age of 5 - 10 years
• Major tenants are families with more than 1 child
• Quieter and greener area with fewer high rises and lower population density
• Less traffic and good access to multiple metro line stops
• Proximity to Pudong Airport (15-30 mins commute)
Source: Knight Frank Research
greater Hongqiao
Geographic coverage: Hongqiao, Gubei, Qingpu Xujing and Minhang
Apartments
Villas
Key drivers/characteristics: • More competitive and lower rental packages offered
• High density of amenities (retail, food & beverage and hotels)
• Proximity to Suzhou and Kunshan for commuters
• The longest standing expatriate community in Shanghai
• Most rental properties have an average buliding age of 10 - 20 years
• High concentration of commercial buildings in Hongqiao, boosting leasing demand
• Major tenants are couples without children and couples with 1 child to 2 children
• Renowned international schools have considerable influence on leasing demand
• Easy access to the CBD areas (30-45 mins commute)
• Proximity to the Hongqiao airport (15-30 mins commute)
Source: Knight Frank Research
Figure 3 : Rentals and vacancy rates of apartments and villas in Greater Hongqiao
1
2
3
4
5
6
7
8
Hongqiao Gubei QingpuXujing
Minhang
Figure 4 : Rentals and vacancy rates of apartments and villas in Decentralised Pudong
JinqiaoGreenCity
LongdongAvenue
Huamu NanhuiFormer French Concession Area
Monthly rental range (RMB) Monthly rental range (RMB)
Monthly rental range (RMB)
Vacancy rate (%) Vacancy rate (%)
Vacancy rate (%)
10
9
8
7
6
5
4
3
2
1
10
9
8
7
6
5
4
3
2
1
10
9
8
7
6
5
4
3
2
1
rental trends
30
60
90
120
150
180
210
240
2006 2007 2008 2009 2010 2011 2012
Source: Knight Frank Research
Downtown Puxi&Pudong Greater Hongqiao Decentralized Pudong
RMB/sqm/mth
Market Downturn Market Correction Market Pick Up
Figure 1 : Average rental rates of expatriate housing by location, 2012
Source: Knight Frank Research
Former French ConcessionArea
Lujiazui Jing’an Xintiandi
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Hongqiao Gubei QingpuXujing
Minhang
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Jinqiao GreenCity
Longdong Avenue
Huamu Nanhui
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Greater HongqiaoDowntown Puxi&Pudong Decentralised Pudong
Shanghai expatriate housing Market Insights 2013
infrastructure in Pudong, expatriates now have more options for residences, with Puxi no longer being the sole choice.
Today, there are 10 bridges and 15 underwater tunnels crossing the Huangpu River and 25% of the metro line stops in Shanghai are located in Pudong, thus the travel distance to Pudong Lujiazui from Puxi downtown has significantly shortened to only ten to twenty minutes. With 2.3 million sq m of Grade-A office space, Pudong’s thriving commercial district amounts to 40% of the total Grade-A office stock in Shanghai. As Little Lujiazui and the Zhuyuan area continue to expand with more commercial buildings under construction, there will be increasing demand for residential properties close to the offices.
The provision of international education facilities is another critical reason for expatriates choosing to live in Pudong where, due to limited land supply in Puxi, a number of international schools have opened their second campuses in Pudong. For example, an increasing number of Japanese families are moving from the Greater Hongqiao area to the decentralised Pudong area due to the opening of a new Japanese School in Pudong Century Park Area. We believe that more expatriate communities will emerge in Pudong rather than Puxi as Pudong has plenty of available land for residential developments in the near future.
Increase in localised expatriate packagesThe expatriate housing market was previously dominated by senior placements that included large housing allowances, but in recent years we are seeing a greater proportion of companies offering localised packages. Since the start of the financial crisis in 2008, uncertainties in the economy have forced employers to look for more cost-effective expatriate compensation models. Multinational companies now tend to sign more “local-plus” contracts with employees from Hong Kong, Taiwan and other Asian countries.
The alternative “local-plus” package
is based on a local pay structure with additional expatriate benefits, such as allowances for housing and part of children’s education. The increasing number of local assignees in multinational companies has led to greater demand from tenants with smaller rental budgets in the range of RMB10,000-25,000. We expect to see more localised packages as MNCs seek to cut costs and to ease administration.
local Chinese play greater role in high-end rental marketLocal wealthy Chinese are also starting to contribute to the rental demand in the high-end rental market. A larger concentration of local Chinese are renting apartments in the rental range of RMB10,000-25,000 per month, the same range of apartment that is growing in demand amongst Shanghai’s expatriates.
This is attributed to a number of factors, including the government’s purchase restrictions on non-Shanghai residents, the local Chinese population’s inability to afford the high housing prices in prime areas and continual uncertainties regarding government policies. We are also seeing a number of wealthy Chinese renting apartments in luxury serviced apartments such as IFC Residential, Peninsula Residence and Fraser Suites.
These apartments are often rented as private clubs for guest receptions and business meetings, helping sustain the demand for serviced apartments and villas with monthly rents over RMB50,000.
Higher rents and lower vacancy rates expected On the supply side, landlords and developers are expected to be increasingly inclined to rent out their properties due to the on-going purchase restrictions in the residential sales market, although new rental supply is set to remain limited.
On the demand side, the improving macroeconomic situation will continue to encourage the entry and expansion
After a market downturn from 2006 to 2009, Shanghai’s luxury rental market started to pick up in 2010, fuelled by rental demand boosted by the increasing number of both international and local assignees. Below we take a look at the market trends, adding our predictions for the expatriate housing rental sector over the next twelve months:
luxury leasing sector has regained market momentumDuring 2008-2010, a number of serviced apartment developments were withdrawn from the leasing market and launched for strata-title sales. Institutional investors facing financial constraints were eager to exit the market by disposing of their properties in Mainland China. However, the trend reversed in 2011 when rental rates went up across Shanghai as the Chinese government tightened credit and levied home purchasing restrictions.
Due to the uncertainties of the sales market, luxury apartment developers were forced to consider whether to release their properties on the rental market or the sales market, otherwise they would have to hold their properties to wait out for long-term gains. One such example is the 39 luxury rental units of the Peninsula Residence that, originally planned for sale, ended up being launched for lease in 2012. We predict that with more luxury owners turning to the rental market, both serviced apartment supply and rental rates are expected to hit historical highs in the coming two years.
Shifting tides to the pudong Area An expatriate community started to emerge in Puxi’s Gubei area two decades ago due to its proximity to Shanghai’s first airport, Shanghai’s original central business district, international schools and metro lines. Additionally, a large number of expatriates prefer to stay in Puxi because of the well-established infrastructure and transportation system. Puxi enjoys a good reputation among expatriates and used to be the only choice for expatriate accommodation. However, thanks to improved
Market Trends
0706
of multinational companies in China, which will contribute to the inflow of expatriates and the strong demand for housing. As Shanghai has been designated as China’s international financial and shipping centre, more international assignees will be relocated to capitalise on the growing regional and global importance of Shanghai.
Additionally, the weak economic environment in Europe and the United States has strengthened investors’ confidence and foreign direct investment in China remains unabated. With a supply shortage, tenants are advised to act quickly in securing accommodation.
Newly refurbished and professionally managed properties are strongly demanded and let out quickly. We expect that rental levels of expatriate housing will increase by 8% this year from RMB 175.5 per sq m per month in 2012 and the vacancy rate will remain low at 4% in 2013.
Common Pitfalls Expatriate housing in Shanghai went through a dramatic change in the past 20 years. Expatriates now enjoy a large variety of choices concerning neighbourhoods, style and design of housing. However, there are no formal dispute mechanisms or bodies dealing with landlord and tenant relations in China.
This type of legislation is administered by local government bodies and circumstances can vary widely across different cities. Generally, the system works in favour of landlords, as there are no restrictions regarding discrimination of tenants, rental price control or significant penalties for delay in repair and maintenance. Qualifying landlords and property management background is crucial during the flat selection process.
In a standard local lease, some common pitfalls concern the method of dispute resolution, hand-over condition and the rights and responsibilities regarding repair and maintenance for both tenants and landlords. It is important
for multinational companies and expatriates to allow for adequate time when choosing new homes during their relocation period.
To mitigate the challenges during the leasing process, we suggest you hire a qualified international residential consultancy to benchmark and negotiate the lease agreement at the outset, qualify the landlord background and ensure you have on-going tenancy support during the term of your lease. Generally, in a standard lease agreement, tenants have the right to hold and enjoy the premises during the term of tenancy free from any interruption
by landlords, implying that landlords shall provide and maintain the premises fit and safe for the residents.
However, there are many clauses which require close scrutiny to ensure there is a maintenance and cleaning schedule of appliances and structural elements, for example, to make sure main drains, pipes and electrical cables are in good working condition.
Ensuring that these landlord obligations are clarified and enshrined in your lease agreement is essential in an emerging market where many individual landlords have limited experience in addressing expatriate expectations.
Ten common pitfalls 1 Cultural and communication gap between expatriates and local Chinese landlords 2 Furnished housing with no option to remove or replace furniture 3 Restrictions on interior design choices at the time of hand-over of premises
4 Poor quality of interior construction and building systems (windows, heating and ventilation) 5 Many landlords do not recognise standard contract terms and templates from MNC’s 6 Some individual landlords do not recognise signed letters of intent and continue negotiating with other parties until a deposit is placed 7 Landlords wrongfully withhold the security deposit (up to two months’ rent) at expiry of lease 8 Change of ownership leads to early termination of lease on short notice (less than 1 month) with limited or no compensation from landlords 9 Landlords unwilling to make reasonable home improvements or repair during lease term
10 Slow to limited response from landlords as many of them reside overseas or in other parts of China
Multinational companies are advised to conduct both quantitative and qualitative research on the local housing market during the assignment planning stage. The expatriates on relocation assignment should personally visit the properties and carry out a detailed due diligence to avoid regrets. Below we list the ten most common challenges expatriates face in the Shanghai rental market.
Shanghai expatriate housing Market Insights 2013
08
number of expatriates permitted to work in Shanghai by the end of 2011 grew by 64.3%, to 164,359 people, from 2005. Currently, almost 70% of these expatriates rent housing ranging between RMB10,000 and RMB30,000 per month, including those without a housing allowance. Fortune 500 American Companies offered the highest housing allowance in the city. In the “Single” category, the housing allowance for Director level staff ranged from RMB28,000 to RMB40,000 per month, whilst the range for firms from Japan, Korea, Hong Kong, Singapore and Taiwan was RMB16,000-24,000 per month.
Expatriate housing allowance is frequently reviewed by corporate
human resource teams, taking into consideration the employee grading, size of family, local rental market trends and company financial status. After the global economic crisis in 2008, most multinational companies postponed staff relocation plans due to concerns over the cooling economic climate. With an increasing number of local assignees in the market and the continual RMB appreciation, housing allowance has been gradually decreasing for middle-level management staff over the past ten years. For example, housing allowance for manager-level single staff declined from RMB30,000 to RMB40,000 per month in 2002 to RMB10,000 to RMB20,000 per month in 2012.
Housing allowance contributes to a large proportion of the total expatriate compensation package cost. Housing allowance rates are usually calculated based on the family size and position of the employees.
The below table provides information on housing allowances typically provided by multinational companies to expatriates in Shanghai in 2012. In recent years, corporate housing budgets have become inadequate, particularly during lease renewal when landlords who enjoy high occupancy rates expect a typical 5-15% rental increase when many foreign firms have remained strict on spending limits. According to the latest statistics, the
Corporate housing allowance review
09
Figure 5 : Monthly rentals of expatriate apartments, 2012
Figure 6 : Monthly rentals of expatriate villas, 2012
Figure 7: Corporate housing monthly housing allowance review, 2012
Former French
Concession
Jing’an
Xintiandi
Lujiazui
Hongqiao
Gubei
Jinqiao Green
City
Huam
u
30,000
40,000
45,000
50,000
55,000
60,000
65,000
70,000
35,000
Former French
Concession Area
Source: Knight Frank Research
Note: Lane homes in the downtown area are excluded.
4 Bedroom (200 - 320 sq m) (RMB)
4 Bedroom (400 - 450 sq m) (RMB)
Studio and 1 Bedroom (50 - 100 sq m) (RMB) 2 Bedroom (80 - 150 sq m) (RMB)
3 Bedroom (150 - 200 sq m) (RMB)
3 Bedroom (200 - 350 sq m) (RMB)
Former French
Concession Area
Jing’an
Xintiandi
Lujiazui
Hongqiao
Gubei
Jinqiao Green
City
Huam
u
20,000
30,000
35,000
40,000
15,000
25,000
10,000
5000
JinqiaoG
reen City
LongdongA
venue
Huam
u
Nanhui
Hongqiao
Gubei
Qingpu
Xujing
35,000
45,000
50,000
55,000
60,000
65,000
70,000
40,000
Former French
Concession Area
Jing’an
Xintiandi
Lujiazui
Hongqiao
Gubei
Jinqiao Green
City
Huam
u
15,000
25,000
30,000
35,000
40,000
45,000
50,000
20,000
Former French
Concession Area
Jing’an
Xintiandi
Lujiazui
Hongqiao
Gubei
Jinqiao Green
City
Huam
u
20,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
25,000
JinqiaoG
reen City
LongdongA
venue
Huam
u
Nanhui
Hongqiao
Gubei
Qingpu
Xujing
30,000
40,000
45,000
50,000
55,000
60,000
65,000
35,000
Minhang
Minhang
Single
Couple
Couple + 1 child*
Fortune 500 American company
Fortune 500 European company
All other companies**
Position
Source: Knight Frank Research
Family size
Manager
Senior Manager
Director
Manager
Senior Manager
Director
CEO/CFO/COO
Senior
Senior Manager
Director
CEO/CFO/COO
RMB16,000 - 20,000
RMB24,000 - 28,000
RMB28,000 - 40,000
RMB16,000 - 24,000
RMB28,000 - 36,000
RMB40,000 - 64,000
RMB64,000 - 80,000
RMB32,000 - 40,000
RMB40,000 - 48,000
RMB52,000 - 64,000
RMB72,000 - 120,000
RMB18,000 - 24,000
RMB20,000 - 28,000
RMB32,000 - 56,000
RMB56,000 - 72,000
RMB32,000 - 40,000
RMB36,000 - 44,000
RMB40,000 - 56,000
RMB56,000 - 72,000
RMB12,000 - 16,000
RMB16,000 - 20,000
RMB24,000 - 32,000
RMB36,000 - 44,000
RMB20,000 - 28,000
RMB24,000 - 32,000
RMB28,000 - 36,000
RMB40,000 - 48,000
RMB12,000 - 16,000
RMB16,000 - 20,000
RMB28,000 - 40,000
RMB9,000 - 15,000
RMB12,000 - 16,000
RMB16,000 - 24,000
+
*For each extra child, the allowance increases by RMB6,000-8,000 per month. **Refers to firms from Japan, Korea, Hong Kong, Singapore and Taiwan.
11
Shanghai expatriate housing Market Insights 2013
Shanghai experienced growing demand for expatriate housing over the last two decades with the city’s economic growth, its status as China’s financial capital and government’s effort to attract foreign enterprises’ headquarter status. The level of popularity of different areas has changed alongside the city’s expansion and improved infrastructure, although the areas of Downtown Puxi & Pudong, Greater Hongqiao and Decentralised Pudong remain the most preferred locations.
Even though corporate housing budgets have generally been squeezed in the wake of the Global Financial Crisis and relocated employees no longer view Shanghai as a hardship posting. While the demand and rents for expatriate housing are expected to rise, a greater proportion of companies are offering localised packages to allow greater flexibility and choice. Shanghai expatriate housing landscape is evolving quickly with the development of international schools, emerging new commercial districts, rapidly expanding infrastructure and the development of higher quality housing options to meet expatriate demand and help in a smooth transition to a new posting.
We have outlined a number of challenges in the Shanghai expatriate housing market, however, with comprehensive local market knowledge and the most experienced team, Knight Frank’s corporate residential services team is ideally placed to ensure that any expatriate looking to relocate to China receives the best advice and support for their housing needs.
long-term lease: A typical long-term lease in Shanghai is two years, consisting of one year fixed term and one year optional term. Only when the one year fixed term has expired is there a break clause, which allows the early termination of the tenancy provided that a written notice is given to the landlord two months in advance. An increasing number of individual landlords insist on the same right to early termination after the one year fixed term.
Short-term lease: A typical short-term lease is 6 months or shorter. Individual landlords generally do not prefer short-term contracts to avoid risks of higher renovation expenses, more inspections of prospective tenants and longer vacant periods. If a landlord does agree to a short-term lease, the terms will be less flexible, the rent will be higher and the full amount will have to be paid up-front. Serviced apartments are the best options if short-term tenancy is needed. An increasing number of asset management firms, which take over individually-owned units, are providing more flexibility, such as short-term leases and improved hand-over conditions.
Security deposit: The standard deposit in Shanghai is equivalent to two months’ rent. Provided that there is no breach of any of terms and conditions of the lease agreement, the deposit will be refunded to the tenant without interest from the date the tenant vacates the premises. In a standard lease agreement,if the landlord suffers losses or damages as a result of the tenant’s breach, the landlord may obtain compensation by deducting the value of these losses from this deposit. Bank and corporate guarantees from firms with strong covenants are increasingly used in lieu of cash deposit.
Most residential leases contain numerous provisions to help both landlords and tenants understand their rights and responsibilities. Below are some standard terms according to Shanghai’s leasing practices:
Agency fee: The standard market agency fee is one month’s rent payable by landlord based on a 1-2 year fixed lease.
Housing rental tax: Rental tax for a standard lease term (exceeding one year but below three years) is 2.5-5% of the average yearly rent and is payable by individual landlords. It is sometimes added to the rental package.
utilities Fee: In Shanghai, housing rents do not include utility charges.However in some cases, these utilities may be negotiated to become inclusive in the rental price at a capped rate and any charge over this amount will be paid by tenants.
Management fee: Management fee is paid by landlords and inclusive in the rental package. This covers management office administration fees, as well as the maintenance, cleaning and repairs of properties, grounds, common areas and facilities.
Right to renewal: There is no mandatory right to renewal of premises. Renewal terms should be discussed during the notice period, which is typically two months prior to lease expiry, and are subject to mutual agreement on fair market terms.
Appendix: Standard Lease Terms
10
Conclusion
Regina Yang, Head of Research & Consultancy
“The demand for expatriate housing with the city’s economic growth, its status as China’s financial capital and government’s effort to attract foreign enterprises’ headquarter status. ”
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Global Corporate Residential Services Team Shanghai larry Hu T +86 21 6032 1751 [email protected] Julie Zhang T +86 21 6032 1750 [email protected] Beijing Jackie Zhu T +86 10 8518 5788-611 [email protected] Hong Kong Renu Budhrani T +852 2846 9550 [email protected] london Jemma Scott T +44(0)20 7861 5244 [email protected] India Anand Narayanan T +91 22 2267 0876 [email protected] Singapore Rommel Tan T +65 6228 6871 [email protected] New York Christine M. Haney Prudential Douglas Elliman T +1 212 303 5250 [email protected]