In an effort to slow down speculators, China has reportedly put new legislation in place that will place severe restrictions on foreign ownership of property. In fact, under the new guidelines, foreigners will not be allowed to own multiple properties on the mainland. In addition, non-Chinese companies will only be allowed to purchase commercial real estate that is going to be used for the company’s own purposes. As part of the new regulations, individual buyers who are interested in purchasing property in China will have to show proof of employment within the country for at least one year.
“The new policy, the most stringent on property purchases by foreigners so far in China, is in line with the country’s latest tightening measures to rein in property speculation,” Yang Hongxu from the Shanghai-based China Research and Development Institute told the Shanghai Daily.
By putting these new regulations in place, the Chinese government hopes to stop investors from purchasing apartments and forcing property prices to rise. According to analysts, however, the new restrictions are not likely to have much of an impact on Chinese property prices, as foreign investment only accounted for about 0.8 percent of property purchases last year. Nonetheless, this recent move by the Chinese government only further demonstrates that the country is concerned about the possibility of the market overheating. Considering the fact that prices have gone up by 20 percent in Shanghai, which is an investor-friendly market, it is easy to understand the government’s concern.
“Policy makers are trying to put on the brakes on capital inflows, similar to what had been announced back in 2006,” Remy Chan, who is the managing director of CBD Commercial Investment Management, told the Wall Street Journal. “How these rules are implemented is another matter, and if these rules are followed to the letter, there could possibly be no foreign investment in commercial property at all, but I have my doubts. The mature players will always find exceptions.”