Nov. 19 – A new circular
recently released by the Chinese government reiterates a four-year-old
regulation that limits housing purchases by foreigners and imposes more
restrictions on the amount and region of the properties.
The circular, co-issued by the State Administration of Foreign
Exchange and Ministry of Housing and Urban-Rural Development on November 4,
clarifies that an overseas resident can only purchase one house for personal
use and that a foreign institution with a branch or representative office can
only purchase a non-residential house for business use in the city where the
office is registered.
Compared to the “Opinions
on Regulating the Entry of Foreign Investment into the Real Property Market and
the Administration Thereof” released four years ago that emphasized foreigners
should show they have more than one year residency in China to purchase
property, the new circular added the maximum quantity of home purchases for
individuals, forbade overseas institutions without an office registration in
China from buying property, and even determined the category of property
(non-residential) they can buy.
Most economists believe
the circular is another measure to stabilize the property price and curb
speculative capital inflow. However, most real estate developers believe this
is not the best policy for the country.
Han Shitong, vice
president of the China Urban Operation and Commercial Property Management
Research Center, worries the new policy for foreign institutions will direct
foreign capital towards commercial property development, instead of
procurement. The modified investment mode will result in an excessive supply of
commercial property and bring about an imbalanced market between developers and
Yang Hongxu, minister of
the Comprehensive Research Department of Shanghai Yiju Real Estate Research
Center, says the new policy will not stop overseas investors from indirectly
purchasing real estate in China through procuring local company shares.
China’s real estate
market is having a tough time under the country’s increasingly tighter
regulations. Last month, 400 small-sized real estate agencies in Shanghai had
to close their doors.
Some real estate
developers believe that while foreign investment in China’s property market may
have led to the real estate bubble, it contributed to the overall development
of Chinese cities at the same time. The restriction on the property investment
by foreigners may not be the most effective way to solve China’s current