'Central Real Estate Stronghold' Shanghai Also Eases Regulations... Encouraging Outsiders to Purchase

Eligibility for Non-Residents to Purchase, Tax Payment Period Reduced from 5 to 3 Years
No Aggregation of Existing Homes After Divorce or Gift

Shanghai, one of the cities in China with the strictest real estate regulations, has eased the housing purchase requirements for non-local residents. Despite repeated investment encouragements from authorities, the real estate market has struggled to recover, prompting even the economic capital to lower regulatory barriers.

On the 27th, Shanghai announced the "Notice on Optimizing Policies and Measures for the Stable and Healthy Development of the City's Real Estate Market," adjusting the mandatory social security tax and personal income tax payment period for purchasing housing in Shanghai from the previous 5 years to 3 years. Additionally, the scope of housing purchases for single-person households, which had been limited to new and second-hand homes outside the Outer Ring Road (외환), will now include second-hand homes within the Outer Ring Road. Shanghai distinguishes the city into the Outer Ring Road area for non-local residents and the Inner Ring Road (내환) area for local residents, allowing single-person households to buy homes even in the city center.

[Image source=Reuters Yonhap News]

Along with this, if talents purchase homes in major areas such as the five new towns, the required social security tax and personal income tax payment period will be reduced to 2 years, and the areas where housing can be purchased will be expanded from "restricted industrial zones" to the entire region.

Among first-tier cities, Shanghai is known for having the strictest housing purchase restrictions for non-local residents (non-local taxpayers). Only households that have paid social insurance or personal income tax for more than 5 years locally could buy homes, and single-person households were not allowed to buy homes in restricted areas even if they had paid taxes for the same period. In Beijing, the capital of China, single-person households can purchase new or second-hand homes if they have paid taxes for more than 5 years. However, with this new measure, Beijing becomes the only city where the "5-year tax payment" requirement still exists.

Shanghai will also implement a measure that excludes homes owned before divorce or homes received as gifts from the count of owned properties for couples purchasing homes after divorce. According to existing regulations, Shanghai counted the total number of homes owned before divorce and included gifted homes in the property count. These regulations were introduced around 2020 in major Chinese cities to prevent speculation through sham divorces. In March, Beijing also withdrew a policy that prohibited both spouses from purchasing homes in Beijing for 3 years after divorce.

Although Shanghai is one of the core first-tier cities, it has not escaped nationwide price declines. According to Zhongyuan Real Estate Data, a market research agency, new home transactions in Shanghai in April were 496,000 square meters, a 34.7% decrease compared to the previous month. Second-hand home transactions were 17,900 units, down 12% from the previous month. Based on National Bureau of Statistics data, second-hand home prices in Shanghai have fallen for 13 consecutive months.