Buying Property in China

As previously reported by Amberlamb, the Chinese government are keen to restrict the amount of speculative investment being made in property to prevent a real estate market bubble and a potentially destabilizing crash in the property sector.  Various strategies have been proposed and certain legislation introduced in a bid to restrict investor behaviour when buying property in China already; and now the latest suggestions from the deputy director general of the commerce ministry’s Foreign Investment Administration are that foreign investors in particular will face even greater restrictions.

Regulations pertaining to the restriction of foreign investment into property in China have yet to be finalised but were hinted at by Lin Zheying from the Foreign Investment Administration yesterday.  Any regulations could dramatically affect recent announcements made by some of the world’s leading financial players such as Morgan Stanley and Citigroup who had planned on expanded their property bases in China substantially.

The Chinese government’s concerns relate in part to the fact that foreign investors buying property in China have created a huge foreign currency cash surplus and it’s believed that by restricting investment into property from overseas investors could help to slow down the too rapid growth in foreign exchange reserves.  The government of China are further worried that investors are only committing to China in a bid to force up the property market artificially before pulling out and reaping their capital returns and causing a real estate sector crash. 

Industry experts disagree with this view however - Liu Yang from Atlantis Investment Management Ltd., is convinced that many foreign investors are committing to buying property in China and investing in the Chinese real estate sector though funding developments for example, simply because they believe the market is naturally strong with excellent and sustainable growth prospects.

It’s the prospect for real growth both in underlying capital value and in rental yield that had drawn companies such as Morgan Stanley and Citigroup to announcing their greater commitment to the Chinese commercial and residential property sectors earlier this year.  Citigroup announced a three year plan to take their initial level of investment to in excess of eight hundred million US dollars through buying property in China in the commercial and residential sectors, and Morgan Stanley were ready to expand their investment base to three billion US dollars by the end of the year.  It remains to be seen whether any further restrictions on foreign investment into real estate in China affect such decisions and whether or not any new legislation will instead seek to protect those investing to enjoy natural capital appreciation.  Hopefully the Chinese government will tread carefully to avoid tarring genuine investors with the same brush as short term speculators. 

Special Reports: Property News for China

China Real Estate Buying Guide
The real estate purchase process for foreign investors in China is complex therefore property investors require decent legal representation

China Property Investor’s Guide
With real estate buying in China now so popular the investment property market particularly in Shanghai is booming

China: The Property Investment Potential
China represents great property investment potential and the Chinese government is seeking to attract overseas investment into the property sector.