China sets limits for foreign buyers

China sets limits for foreign buyers

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BEIJING China on Monday announced rules to limit foreign investment in property amid quickening efforts to cool the surging economy, the official Xinhua press agency said. Under the new rules, foreigners would face “restrictions on residential property purchases,” the agency said, adding that developers would be required to invest more of their own money in projects to reduce heavy borrowing.

The rules are meant to “improve the efficiency of using foreign investment,” Xinhua said. It did not say when the regulations would take effect. The regulations are similar to a draft published this month, but they add a requirement that foreigners must have worked or studied in China for at least a year to be eligible to buy a home. Other aspects of the new rules, drawn up by the Ministry of Construction and five other government departments and published on Xinhua’s Web site, were unchanged from the draft.

Michael Hart, an associate director of the property consultants Jones Lang LaSalle, based in Shanghai, did not see the regulations as a serious obstacle to foreign investment in the sector. “I think the government sees a positive influence from foreign investment, because if they didn’t, they would’ve banned it outright,” Hart said.
“What they are doing is funneling investment in through structures where the central government can have more clarity on who in fact is investing and how they are investing,” he said.

The rules stipulate that only foreign entities with offices in China and foreign individuals who meet the residency requirement may purchase property, and that it must be for their own use.Foreign companies or individuals who want to buy property not for their own use must establish a locally registered investment company and buy through that company. Foreign property firms investing more than $10 million must have registered capital of at least 50 percent of the investment.

The government has tried to rein in an investment boom by raising interest rates, tightening lending rules and banning some construction projects outright.
Officials worry that excessive spending on assets could ignite inflation or cause problems for banks if deeply indebted borrowers default on loans.
China has had limited success in its attempts to control frenzied building of factories, luxury apartment and other projects that have turned its cities into forests of construction cranes.

The government said last week that the number of new construction projects jumped by 22.2 percent in the first half of the year, fueling an 11.3 percent rise in economic growth in the second quarter, the highest rate in a decade.Investment from Hong Kong and other sources outside mainland China has poured into real estate.
Foreign investment in Chinese real estate rose 27.9 percent in the first six months of the year from a year earlier, Xinhua said, without giving the total amount invested.
Investors apparently hope to profit from rising prices and an anticipated rise in the yuan, which would lift the value of mainland assets in foreign currency terms.

Source: IHT