China Real Estate Investing

Many individual foreigner investors are finding it difficult to buy real estate in China. Not only are foreigners faced with  the not insignificant cultural and practical difficulties of buying property in China, they must also fight the recently-introduced legislation, which is designed to limit foreign ownership in order to tame the booming real estate market.

Early in 2007, a new regulation was announced, which follows on from similar central government efforts in 2006. Foreigners living in Beijing are requiring to get certificates from the Beijing Municipal Public Security Bureau to prove they have been in China for at least one year for work or study before being permitted to buy property. The regulation also banned foreigners from using it for anything other than residential purposes or buying more than one residence.

Eric Chan, deputy managing director of Savills UK says, “It is understandable for the government to rein in foreign investment in the property market when supply can barely meet the huge domestic demand.”

In July 2006, six ministries led by the Ministry of Construction issued a statement that required foreigners to live in China for at least a year before being allowed to purchase real estate. But, it was obvious that the rule did not include any enforcement measures and property developers in Beijing continued to accept offers  from foreign buyers.

The government has also clamped down on overseas residents - including those from Taiwan, Hong Kong or Macao, as well as overseas Chinese - from buying property on the mainland.

Overseas residents wishing to buy property in Beijing now require a residential status certificate. They are now required  to provide a passport, documents to prove they have worked or studied in Beijing for over one year, papers verifying their present address and two passport-sized, along with a signed document attesting to the fact that they will live in the house - not rent it out or sell it.

Chan said that the rules are meant to curb investment demand, particularly among commercial investors, rather than prevent foreigners from buying houses for their own living purposes. Despite the fact that the process has become more complicated, foreigners’ demand for housing remains strong.

"I’ve talked with many foreigners. Most of them show great interest in China’s property market, despite the restraining measures," says Chan. "Just think about it - there are more than 100,000 foreigners living in Beijing, and the number is growing, helped by the expansion of multinational companies."

China is facing the same dilemma as much of the rest of the Asian emerging markets – torn between a desire to stimulate foreign investment, yet at the same time prevent a situation whereby domestic house purchases become all but impossible. India seems to have come down firmly on the side of the institutional investors, but China has yet to make the decision.

In spite of the new regulations, foreign investors - both institutional and individual - remain hungry for a piece of China’s real estate market, especially in cities like Beijing, although it seems that much of this investment is currently limited to the luxury markets.

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