purchasing a home in China

[GZBILL]

Bill what is the interest rate that ICBC charges? I have also heard that a sales tax is paid at the time of purchasing and then no more tax afterwards. Is this true and if so how much tax is paid?

 

Interest rates are set by the People's Bank of China and were just raised. If I remember correctly, it is approximately 6% -- no more than 6.1% I think. That said, PBOC does allow bank's to deviate from the official rate, but by no more than 10%. If you are what they call an "Elite" customer, they will negotiate rates. All banks pretty much sing the same tune.

 

One important item is that most Chinese banks only offer adjustable rate mortgages. If the PBOC rate changes, once a year the bank will adjust your interest rate. Try to find a fixed rate mortgage, but it is difficult.

 

There is no sales tax. You do pay a land tax (or whatever they call it), but it is something like < 1% of the purchase price. There are other fees like water & sewage hookup, telephone service, gas installation and electricity hookup fees, but these will probbaly only set you back about 10k RMB in total. There is also a fee that you pay equal to 1% of the purchase price. This is a housing maintenance fund that is kept under your name in a local bank and that the management company has access to if there is an extraordinary maintenance issue that is out-of-warranty. Ours have never been touched.

 

For now, in China there is no annual property tax assessment.

 

Oh, you do have a monthly management fee. I'm not sure how they calculate the ranges, but it's based on the size of your home. I think the cap is 3 RMB per m2. This pays the management company that the homeowner's association hires to provide services like running the pool, providing security guards, etc ... .

[chilton747]

Bill what is the interest rate that ICBC charges? I have also heard that a sales tax is paid at the time of purchasing and then no more tax afterwards. Is this true and if so how much tax is paid?

 

Interest rates are set by the People's Bank of China and were just raised. If I remember correctly, it is approximately 6% -- no more than 6.1% I think. That said, PBOC does allow bank's to deviate from the official rate, but by no more than 10%. If you are what they call an "Elite" customer, they will negotiate rates. All banks pretty much sing the same tune.

 

One important item is that most Chinese banks only offer adjustable rate mortgages. If the PBOC rate changes, once a year the bank will adjust your interest rate. Try to find a fixed rate mortgage, but it is difficult.

 

There is no sales tax. You do pay a land tax (or whatever they call it), but it is something like < 1% of the purchase price. There are other fees like water & sewage hookup, telephone service, gas installation and electricity hookup fees, but these will probbaly only set you back about 10k RMB in total. There is also a fee that you pay equal to 1% of the purchase price. This is a housing maintenance fund that is kept under your name in a local bank and that the management company has access to if there is an extraordinary maintenance issue that is out-of-warranty. Ours have never been touched.

 

For now, in China there is no annual property tax assessment.

 

Oh, you do have a monthly management fee. I'm not sure how they calculate the ranges, but it's based on the size of your home. I think the cap is 3 RMB per m2. This pays the management company that the homeowner's association hires to provide services like running the pool, providing security guards, etc ... .

 

Thanks again Bill. You have put this in simple terms to where i can even understand There are many similarities to our system in the US. But their (the Chinese) way of approaching this system is definitely not the same as ours

[Tony_onrock]

Bill what is the interest rate that ICBC charges? I have also heard that a sales tax is paid at the time of purchasing and then no more tax afterwards. Is this true and if so how much tax is paid?

 

Interest rates are set by the People's Bank of China and were just raised. If I remember correctly, it is approximately 6% -- no more than 6.1% I think. That said, PBOC does allow bank's to deviate from the official rate, but by no more than 10%. If you are what they call an "Elite" customer, they will negotiate rates. All banks pretty much sing the same tune.

 

One important item is that most Chinese banks only offer adjustable rate mortgages. If the PBOC rate changes, once a year the bank will adjust your interest rate. Try to find a fixed rate mortgage, but it is difficult.

 

There is no sales tax. You do pay a land tax (or whatever they call it), but it is something like < 1% of the purchase price. There are other fees like water & sewage hookup, telephone service, gas installation and electricity hookup fees, but these will probbaly only set you back about 10k RMB in total. There is also a fee that you pay equal to 1% of the purchase price. This is a housing maintenance fund that is kept under your name in a local bank and that the management company has access to if there is an extraordinary maintenance issue that is out-of-warranty. Ours have never been touched.

 

For now, in China there is no annual property tax assessment.

 

Oh, you do have a monthly management fee. I'm not sure how they calculate the ranges, but it's based on the size of your home. I think the cap is 3 RMB per m2. This pays the management company that the homeowner's association hires to provide services like running the pool, providing security guards, etc ... .

 

Thanks again Bill. You have put this in simple terms to where i can even understand There are many similarities to our system in the US. But their (the Chinese) way of approaching this system is definitely not the same as ours

 

On the tax issue the following is a summary:

At purchase:

(1)0.05% stamp duty on the contract sum, payable by the buyer

(2) 3% deed tax (similar to real estate transfer tax) on the purchase price.

(3) 1% maintenance fund (which can be replace by the next buyer when you sell)

During ownership:

(1) property management fee, collected by the property management company. This is determined by the property management co. similar to a condo fee. It can range from 1RMB to 9 or more RMB (for luxury apartments) per square meter. It covers the maintenance of common areas and landscaping etc.

(2) Property tax. So far this does not yet exist, but legislation is being considered. Unfortunately it may come into effect some day as the government tries to cool down property prices. On the other hand, due to the number of property owners, it is extremely unpopular and may run into a lot of resistence. Chances are it may be imposed, but only on apartment bigger than 140 square meters.

(3) Urban real estate tax. Imposed only on commercial property using 80% of the purchase price as base or 12% on the net rental. It does not affect most people, unless you are investing in commerical real estate.

On sale:

(1). 5% business tax on the capital gains. Not yet commonly collected although it is on the books. There is an exemption, for property less than 140 sq meters, it is not imposed if you hold the property for 5 years or more.

(2). Capital gains tax. Also not really enforced in every place. It is otherwise 20% on the gain.

(3). LVAT or land value appreciation tax. Just started enforcement on developers and not yet really collect on consumer sales

(4) 0.05% stamp duty.

[GZBILL]

On the tax issue the following is a summary:

At purchase:

(1)0.05% stamp duty on the contract sum, payable by the buyer

(2) 3% deed tax (similar to real estate transfer tax) on the purchase price.

(3) 1% maintenance fund (which can be replace by the next buyer when you sell)

During ownership:

(1) property management fee, collected by the property management company. This is determined by the property management co. similar to a condo fee. It can range from 1RMB to 9 or more RMB (for luxury apartments) per square meter. It covers the maintenance of common areas and landscaping etc.

(2) Property tax. So far this does not yet exist, but legislation is being considered. Unfortunately it may come into effect some day as the government tries to cool down property prices. On the other hand, due to the number of property owners, it is extremely unpopular and may run into a lot of resistence. Chances are it may be imposed, but only on apartment bigger than 140 square meters.

(3) Urban real estate tax. Imposed only on commercial property using 80% of the purchase price as base or 12% on the net rental. It does not affect most people, unless you are investing in commerical real estate.

On sale:

(1). 5% business tax on the capital gains. Not yet commonly collected although it is on the books. There is an exemption, for property less than 140 sq meters, it is not imposed if you hold the property for 5 years or more.

(2). Capital gains tax. Also not really enforced in every place. It is otherwise 20% on the gain.

(3). LVAT or land value appreciation tax. Just started enforcement on developers and not yet really collect on consumer sales

(4) 0.05% stamp duty.

 

Looks about right except for the property management fees and the maintenance fund. A lot of people complained about this in several big cities and now each city has a cap on property management fees. In Guangdong, for example, the cap is < 4 RMB per m2.

 

Maintenance funds are disappearing, too. I just checked my two latest and they were 0.5%.

[GZBILL]

On the tax issue the following is a summary:

At purchase:

(1)0.05% stamp duty on the contract sum, payable by the buyer

(2) 3% deed tax (similar to real estate transfer tax) on the purchase price.

(3) 1% maintenance fund (which can be replace by the next buyer when you sell)

During ownership:

(1) property management fee, collected by the property management company. This is determined by the property management co. similar to a condo fee. It can range from 1RMB to 9 or more RMB (for luxury apartments) per square meter. It covers the maintenance of common areas and landscaping etc.

(2) Property tax. So far this does not yet exist, but legislation is being considered. Unfortunately it may come into effect some day as the government tries to cool down property prices. On the other hand, due to the number of property owners, it is extremely unpopular and may run into a lot of resistence. Chances are it may be imposed, but only on apartment bigger than 140 square meters.

(3) Urban real estate tax. Imposed only on commercial property using 80% of the purchase price as base or 12% on the net rental. It does not affect most people, unless you are investing in commerical real estate.

On sale:

(1). 5% business tax on the capital gains. Not yet commonly collected although it is on the books. There is an exemption, for property less than 140 sq meters, it is not imposed if you hold the property for 5 years or more.

(2). Capital gains tax. Also not really enforced in every place. It is otherwise 20% on the gain.

(3). LVAT or land value appreciation tax. Just started enforcement on developers and not yet really collect on consumer sales

(4) 0.05% stamp duty.

 

Looks about right except for the property management fees, deed tax and the maintenance fund. A lot of people complained about this in several big cities and now each city has a cap on property management fees. In Guangdong, for example, the cap is < 4 RMB per m2.

 

Maintenance funds are disappearing, too. I just checked my two latest and they were 0.5%.

 

Urban land tax should not effect individual expats since they are not allowed to purchase commercial real estate anyhow as an individual.

 

No deed tax on purchases of new property in Beijing, Shanghai or Guangzhou. Perhaps in other places or on second hand homes.

 

LVAT is only collected from land developers, though at some point they will pass this cost on to the consumer in the form of higher prices per m2.

 

Capital gains tax is not in place yet and looks unlikely to be at any time soon. If it should be enacted, those who live in their homes for more than a certain number of years will be exempt. Usually they mention 5 years as being the cut off.

 

Property tax: not likely to happen. If, however, they do impose a property tax it will be for, as OP says, larger units or units which are not the owner's principal place of residence.

Edited August 20, 2007 by GZBILL (see edit history)

[Tony_onrock]

The property management fee really depends on the property. For my apartment in Shanghai it is 1 RMB per SM per month. For our Shama Lux Service apartment in Xintiandi Shanghai, it is 9 RMB for every one else but we negotiated down to 6 cause we were buying 103 apartments at a time to support Shui On's IPO.

The housing maintenance fund is mandatory 2% with developer paying 1% and buyer paying the other 1%. Many developers don't charge it, as in my apartment situation to prompt better sales.

[GZBILL]

The property management fee really depends on the property. For my apartment in Shanghai it is 1 RMB per SM per month. For our Shama Lux Service apartment in Xintiandi Shanghai, it is 9 RMB for every one else but we negotiated down to 6 cause we were buying 103 apartments at a time to support Shui On's IPO.

The housing maintenance fund is mandatory 2% with developer paying 1% and buyer paying the other 1%. Many developers don't charge it, as in my apartment situation to prompt better sales.

 

In Glory manor in GZ, which has the highest management fee in the city,we pay 4 RMB per m2. The management company we hired wants to raise it and homeowners agreed, but the government refuses to lift the cap. Manafement fees in Shanghai and beijing may be higher, but I don't pay those -- the tenants do.

 

For the last two properties I bought -- GZ and Shanghai the fund was 0.5%. For each property the developer deposits the money into a special bank account in the homeowner's name and you get an ATM card that is good only for checking the balance. I'll haver to check all my ATM cards, but I am sure that the first and last house I bought in GZ were 0.5% and the latest one in Shanghai the same.

[SirLancelot]

Manafement fees in Shanghai and beijing may be higher, but I don't pay those -- the tenants do.

 

Really? Your tenants do? I've rented two apartments in SH and both times it was assumed--of course I made sure of that--that the management fee was paid by my landlord. Obviously he could easily have incorporated the fee into the rent, but I certainly wasn't going to be bothered with paying that bill to the management office myself.

 

It's interesting. I'm curious if the law states that by default if it falls the tenant or the landlord. My assumption is if it's not strictly written in the rental contract, that the default would fall onto the property owner, rather than the tenant.

[GZBILL]

Manafement fees in Shanghai and beijing may be higher, but I don't pay those -- the tenants do.

 

Really? Your tenants do? I've rented two apartments in SH and both times it was assumed--of course I made sure of that--that the management fee was paid by my landlord. Obviously he could easily have incorporated the fee into the rent, but I certainly wasn't going to be bothered with paying that bill to the management office myself.

 

It's interesting. I'm curious if the law states that by default if it falls the tenant or the landlord. My assumption is if it's not strictly written in the rental contract, that the default would fall onto the property owner, rather than the tenant.

 

Of course the legal responsibility must be on the property owner since the management company / homeowner's committee have no recourse against anybody else for nonpayment.

 

Your landlord could very well have agreed to handle that, but of course that must be factored into the rental price. I, however, would never agree to assume that duty because a) I wouldn't be travelling to Shanghai or Beijing every month to pay the fees nor would I want to bother with calling to see how much the fee was every month and because the amount changes every month.

 

Regarding "b", the amount billed to each unit every month not only includes the fixed amount for management fee, but also includes charges for water & electricity for public spaces, a monthly variable charge for streetlights and often cable TV charges and potable water services. The vast majority of landlords will include this as tenant responsibility. You're lucky yours is so nice!

 

All of my houses but for two are rented out to a certain company as housing for their expat staff. They pay a full year in advance and each tenant is responsible for management fees, public charges, incidentals and their own utility service.

Edited August 20, 2007 by GZBILL (see edit history)

[SirLancelot]

My "guan li fei" was strictly only the management fee, nothing more. I paid the electricity bill directly to the electric company. I paid the gas bill directly to the gas company. I paid water directly to the water company. I paid telephone bill directly to Shanghai Telecom. The management fee was only for the maintenance of the building, the security guards, and the landscaping, nothing more.

 

In both apartments, they were billed every 6 months. I just passed the bill notice onto the landlords. Interestingly enough, both actual owners were living abroad (one in Australia and another in the US) and had their respective relatives in SH collect the rent. Actually for one landlord, I simply deposited the monthly rent into his bank account each month.

 

Manafement fees in Shanghai and beijing may be higher, but I don't pay those -- the tenants do.

 

Really? Your tenants do? I've rented two apartments in SH and both times it was assumed--of course I made sure of that--that the management fee was paid by my landlord. Obviously he could easily have incorporated the fee into the rent, but I certainly wasn't going to be bothered with paying that bill to the management office myself.

 

It's interesting. I'm curious if the law states that by default if it falls the tenant or the landlord. My assumption is if it's not strictly written in the rental contract, that the default would fall onto the property owner, rather than the tenant.

 

Of course the legal responsibility must be on the property owner since the management company / homeowner's committee have no recourse against anybody else for nonpayment.

 

Your landlord could very well have agreed to handle that, but of course that must be factored into the rental price. I, however, would never agree to assume that duty because a) I wouldn't be travelling to Shanghai or beijing every month to pay the fees nor would I want to bother with calling to see how much the fee was every month and B) because the amount changes every month.

 

Regarding "b", the amount billed to each unit every month not only includes the fixed amount for management fee, but also includes charges for water & electricity for public spaces, a monthly variable charge for streetlights and often cable TV charges and potable water services. The vast majority of landlords will include this as tenant responsibility. You're lucky yours is so nice!

 

All of my houses but for two are rented out to a certain company as housing for their expat staff. They pay a full year in advance and each tenant is responsible for management fees, public charges, incidentals and their own utility service.

[GZBILL]

My "guan li fei" was strictly only the management fee, nothing more. I paid the electricity bill directly to the electric company. I paid the gas bill directly to the gas company. I paid water directly to the water company. I paid telephone bill directly to Shanghai Telecom. The management fee was only for the maintenance of the building, the security guards, and the landscaping, nothing more.

 

In both apartments, they were billed every 6 months. I just passed the bill notice onto the landlords. Interestingly enough, both actual owners were living abroad (one in Australia and another in the US) and had their respective relatives in SH collect the rent. Actually for one landlord, I simply deposited the monthly rent into his bank account each month.

 

Each property management company may handle it differently it seems.

 

All the management companies I deal with put the bill directly in the apartment's mailbox each two months.

 

Strange though is how would the management company in your complex collect the electricity charges associated with water pump and elevator usage? Those charges cannot be directly assessed by the electric company to each subscriber since they are not individualy metered to. The same with the municipal levy for street lighting. Or perhaps they lumped that all into the management fee.

[SirLancelot]

Strange though is how would the management company in your complex collect the electricity charges associated with water pump and elevator usage? Those charges cannot be directly assessed by the electric company to each subscriber since they are not individualy metered to. The same with the municipal levy for street lighting. Or perhaps they lumped that all into the management fee.

 

Yes, I'm sure they lump those misc charges into this "management fee". It's somewhat like an Association fee in the US for town homes and condos. This fee pays for the part of the upkeep and maintenance of the apartment complex which can't be directly metered for each individual user on an individual basis, such as the electricity used in the hall ways and the electricity for the elevator and the electricity for the security guard office.

Edited August 20, 2007 by SirLancelot (see edit history)

[Tony_onrock]

My "guan li fei" was strictly only the management fee, nothing more. I paid the electricity bill directly to the electric company. I paid the gas bill directly to the gas company. I paid water directly to the water company. I paid telephone bill directly to Shanghai Telecom. The management fee was only for the maintenance of the building, the security guards, and the landscaping, nothing more.

 

In both apartments, they were billed every 6 months. I just passed the bill notice onto the landlords. Interestingly enough, both actual owners were living abroad (one in Australia and another in the US) and had their respective relatives in SH collect the rent. Actually for one landlord, I simply deposited the monthly rent into his bank account each month.

 

Each property management company may handle it differently it seems.

 

All the management companies I deal with put the bill directly in the apartment's mailbox each two months.

 

Strange though is how would the management company in your complex collect the electricity charges associated with water pump and elevator usage? Those charges cannot be directly assessed by the electric company to each subscriber since they are not individualy metered to. The same with the municipal levy for street lighting. Or perhaps they lumped that all into the management fee.

 

For residential, the lighting etc for common areas are lumped into management fee generally. I know the maintenance fund is being collected at 2% cause that is what we budget for the properties we are the developer (we have three development projects, one in Guangzhou and two in Jiangsu province). The amount is budgeted into the sales price though when it comes to calculating profits, it is not treated as sales proceeds.

Never heard of residential properties with 60 years, may be older properties. Now by law, it is 70.

The only rental properties that we have are serviced apartments and one small hotel under construction and the serviced apartment is run like a hotel. The residents don't have to do a thing.

[GZBILL]

Strange though is how would the management company in your complex collect the electricity charges associated with water pump and elevator usage? Those charges cannot be directly assessed by the electric company to each subscriber since they are not individualy metered to. The same with the municipal levy for street lighting. Or perhaps they lumped that all into the management fee.

 

Yes, I'm sure they lump those misc charges into this "management fee". It's somewhat like an Association fee in the US for town homes and condos. This fee pays for the part of the upkeep and maintenance of the apartment complex which can't be directly metered for each individual user on an individual basis, such as the electricity used in the hall ways and the electricity for the elevator and the electricity for the security guard office.

 

Still strange. Electricity used for water pumps and elevators is metered independently for each building in the complex and the usage is never the same each month. They divide the total amount on the meter and factor in which floor you live on as the higher floors pay a higher percentage. The municipal surcharge for streetlights is based also on a neighborhood basis and then factored using the m2 of each unit. The billed amount is always different each month.

 

Perhaps your management association does it differently, but in the 7 I deal with every two months, they don't include these items in the management fee.

[SirLancelot]

Still strange. Electricity used for water pumps and elevators is metered independently for each building in the complex and the usage is never the same each month. They divide the total amount on the meter and factor in which floor you live on as the higher floors pay a higher percentage. The municipal surcharge for streetlights is based also on a neighborhood basis and then factored using the m2 of each unit. The billed amount is always different each month.

 

Perhaps your management association does it differently, but in the 7 I deal with every two months, they don't include these items in the management fee.

 

Yep, it's definitely different.

 

I knew how much electricity I'm was using at the apartment each month from the electric meters in the hallway. I'm billed for each kilowatt of electricity I used. In fact, in SH, many of the buildings have dual metering. There are two separate meters. One for 6:00am to 10:00pm and the other to meter from 10:00pm to 6:00am. The electric rate was .61rmb for each kw from 6am - 10pm and .30rmb from 10pm to 6:00am. I was lucky enough to have dual meters in both my apartment complexes. The monthly electric bills I received showed exactly how many kw I used from each meter and charged accordingly.

 

Through those metered electric bills, I was never billed for any of the electric use you mentioned above.

 

As for the "management fee", each apartment is billed based solely on the sq/m. It's a set rate multiplied by the size of the apartment. At the newer apartment I lived in, it was between 3-3.5rmb per sq/m and the older apartment was like 1.9x per sq/m.

 

It's possible they charged each floor a little different price but at least for each apartment, the rate is constant. The 3.5rmb or 1.9rmb per month rate did not fluctuate monthly.

 

I did quite a bit of apartment shopping (intent to purchase) during my stay there and never once did the agents tell me that the rate of the management fee would change monthly. Each time I asked about the management fee of the complex I was looking into, I was quoted a specific rate per sq/m. That is consistent with the semi-annual "management fee" bills/notices I received in my mailboxes.

 

I actually think this is a moot discussion. It is my belief that regional and specific municipal policies may vary widely. So what may be the case for GZBILL may be very different for Chilton in ZS and very different yet again for Beijing residents. I cannot believe these policies would be universal all across China.

Edited August 20, 2007 by SirLancelot (see edit history)