China Sets Limits on Foreigners Buying Houses

The Chinese government has issued a statement recently regarding tighter regulations for foreign organizations and individuals buying property in China. Since then, Chinese and non-Chinese people have speculated about what the regulations will mean for foreign individuals and companies, and how effective they will be in tackling issues in China's real estate market.Allie Johnson has more.

Under the new regulations, foreign individuals may only buy one home for their own use. Foreign organizations can not buy property for residential use. As well, foreigners will need to show proof of having worked in China for at least one year before the purchase. Individuals from Hong Kong, Macao and Taiwan will now also need to provide documents proving they are working, studying or residing on the mainland when buying a home.

The regulations are seen as an effort by the government to cool heating Chinese markets and tackle real estate speculation by overseas investors. According to China's Ministry of Commerce, foreign direct investment in Chinese real estate increased by 48% between January and October of this year.

So what do people, both Chinese and foreign, think of the regulations? And how effective do they feel the regulations will be in addressing the issues they are meant to tackle?

Meg Maggio, director of Pekin Fine Arts Gallery in Beijing and former corporate lawyer, believes the measures are a positive step to curb inflation and increase housing accessibility.

"It's a good thing. I think it will make the real estate market a more even playing field. And give actually a wider cross-section of the population access to apartments."

But some commenting on the new directive have questioned how effective it will be in actually tackling the core issues of inflation and speculation that it is meant to combat.

Wang Lina is a researcher at the Chinese Academy of Social Sciences in the area of real estate. She believes that while the overall idea behind the regulation is a positive move to cool the market, it will not be easy to implement.

"Our property rights or title registration system are still not unified. And it's still in the process of building. So this kind of information, its transparency, are not quite clear yet. So this will also cause some difficulties for the policy makers."

According to Lester Ross, co-partner-in-charge at the law firm WilmerHale in Beijing, foreign organizations are not likely to feel the effects of the new regulations.

"Most foreign companies operate through subsidiaries – that is, companies incorporated in China. And this new directive doesn't address them. So I don't think it will have a major impact on foreign companies, broadly defined."

Professor Francis Wong is part of the Building and Real Estate Department of the Polytechnic University of Hong Kong. He believes Hong Kong investors will, in contrast, be impacted, because the new directive requires them to work, study, or reside in Mainland China. However, he feels that the regulation may fall short of its aims to tackle speculation.

"This new regulation affects both short-term speculators and long-term investors. So I think there should be a better way to differentiate between who are the long-term investors and who are the short-term speculators."

Professor Wong says that in addition to hot money, the Chinese government needs to deal with internal consumption within China. He recommends that local government provide affordable housing to combat this core issue.

For CRI, I'm Allie Johnson.