We have bought an apartment and originally I planned to write down the process. Catshanghai has done already an excellent job in describing the process.
The only thing I like to add is that fees for real estate agents are negotiable. Officially they are 1% of the purchase price paid by the buyer and the seller respectively. As the internal motto of one of the agents we visited is, “Nothing better than a sale”, we discovered they are more than willing to drop the 1% from the sellers side to lower the purchase price.
Tax is 1.5% of the price for apartments (houses) where the square meter price is 17.500 Rmb or less. Luxury apartments (houses), with a square meter price over 17,500 Rmb will set you back an additional 1.5%
Foreigners are officially only allowed to buy a house when they have been working in China more than a year. I’ve heard though that depending on the district having a contract for a year can be sufficient.
The most important in the whole process is having a reliable real estate agent. Real estate agencies are pretty much within 20 meters from wherever you stand in the city. The bigger names are in general more reliable, have a bigger network and have good contacts with the notary, the real estate management office and other unavoidable red tape. Agents tend to work together with one bank for the mortgages and can give you a small discount.
Current regulations make it expensive to sell your house within 5 years. You’ll have to pony up 5% of the sales prices as tax. After 5 years you’ll only have to pay tax (20 percent I think) over the profit you have made.
We have been looking for about a year, on and off and looking back I wished we had bought rather earlier than later. Prices don’t want to go down, it’s a crazy market. Apartments we saw 2 months ago increased by 10 percent. If you ever think of buying an apartment/house in Shanghai and intend to use it for living I’d say go with your gut feel. If you like it, buy it. If you wait, there’s a big chance it has been sold and your next favorite will be more expensive.