A common misconception among expats new to Shanghai is that a local Chinese agent or agency will be cheaper, or have the ability to get a better price on a property in opposed to a English speaking or Expat agency.
Now if your budget is less than 9000 RMB, then your only option might be to use a local Chinese agency (street shop), as the work involved with sourcing and negotiating for a property of this price is generally too much trouble for many agents to want to get involved with.
The reason behind why local Chinese agencies they are not cheaper is that you personally do not pay any cash to the agent, they are paid by the landlord usually the amount one months rental fee.
Here is where it gets confusing: Because the agents get 1 months commission from the landlord, if they negotiate a better rental fee on your behalf with the landlord, then they are also reducing their commission amount. so…. what motivates an agent to negotiate for a better price on a property ?
Expat property agencies in Shanghai
A few reasons why you Should use a reputable expat orientated agency is that they usually provide a myriad of additional services and aftercare support for no additional fee, such as City Orientation, Domestic Help, Cross Cultural Training, Visa and Legal Support. The expat agencies are familiar with the problems expats have when relocating to Shanghai and have the solutions ready.
Their Business is built on referrals and relationships, to get those referrals a good expat focused agency will support you though your stay in Shanghai and assist with your departure and getting your deposit back when its time to leave.
Foreign companies (wholly foreign owned enterprises) in China are limited to the real estate activities they can engage in, many are operating as housing consultancy companies which means they can legally provide a consultancy service and help you find a apartment to rent in Shanghai. However for property sales they are not licensed to facilitate property sales and would need to seek the support of a licensed Chinese company whom will be able to do the legal work for a property purchase or sale.
Chinese property agencies in Shanghai
There is then the Chinese licensed and unlicensed realtors in Shanghai, the unlicensed who possibly don’t have an office, perhaps work from their own apartment or even a coffee shop will rent a license from another agency for around 1200 RMB /month.
It’s not easy to pass the qualifying exam to become a licensed agent in Shanghai, applicants who want to take the examination first need to meet education and work experience requirements. For example, applicants who have an undergraduate degree need only four years of experience in the industry. Those with less education need eight years of experience. Masters degree holders only need two years of experience working at an agency.
The requirements limit people who can become either a real estate agent or work in an agency, Just because they dress up in a nice suit doesn’t mean they are a professional realtor.
Signing a contract for apartment without a licensed agent, could put you in a bad legal position, especially if there is ever a dispute.
Negotiating rental agreements
Whilst there is oversupply of local housing there is and supply of good quality properties and huge reduction from asking prices aren’t possible.
Discounts range between 10 to 15% of original asking price but the final rental depends on other factors. Most landlords provide a furnished property for expatriates.
A second hand property should be freshly painted and any damages repaired. Electrical lines, appliances and plumbing should be serviced with evidence of this given to tenant.
Agents will usually charge a landlord/tenant or both for renewing a lease so ensure that your period is lengthy enough.
You can sign a 3 year lease with an option to renew in the second and third year at the same rental amount or market price. To read more about contracts please visit our article on Contracts. Rentals prices are “asking prices”. Final rentals are influenced by a number of criteria.
The landlord may not want to lower the rental due to the following reasons:
- The property is of good quality
- Landlord has better offers in hand
- Landlord not in hurry to rent out property
- Landlord may believe property is of certain value
- Landlord may not want to pay full commission
- The agent’s lack of experience in negotiations
- The agents need of a high commission
A prospective tenant can get lower rentals if they follow some of the advice below:
- Pay rent on quarterly basis
- Don’t request for extra items
- Don’t ask to remove items
- Sign a longer lease term than requested
- Take the property unfurnished (if not furnished)
- Commence the contract as soon as possible
- Don’t get and offical tax reciept (Fapiao) unless necessary