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China - Real Estate - Limitations to Foreigners

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Joined: 17 Jul 2006
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PostPosted: Tue Jul 25, 2006 9:20 pm    Post subject: China - Real Estate - Limitations to Foreigners Reply with quote

China Restricts
Foreign Spending
On Real Estate
July 25, 2006; Page A5

SHANGHAI -- China announced new rules to curb accelerating foreign investment in its real-estate market, the government's latest effort to rein in its fast-growing economy. Meanwhile, President Hu Jintao said the government would take further steps to prevent excessive investment in key industries.

The rules, unveiled yesterday, target property speculation and could help reduce investment from overseas. But their effect on the overall market is likely to be primarily psychological because foreign money accounts for a relatively small share of total spending on property in China, analysts said.
[Hu Jintao]

The rules reduce the amount big foreign property buyers can borrow by requiring them to provide at least 50% of the capital up front for property investments of $10 million or more, up from 35% of the total now. The rules also limit who can purchase an apartment to overseas nationals who actually live in China, according to a statement posted on a Web site run by the State Council, China's cabinet.

Issued jointly by six government agencies including the central bank, the rules are aimed at tempering "relatively fast growth in foreign investment" in the local real-estate market, the statement said.

The new restrictions follow other measures aimed at cooling economic growth that the government worries could overheat. In the second quarter, the economy expanded at its fastest rate in more than a decade; it grew 11.3% from the same period in 2005.

In recent months, the government has raised interest rates, reduced the share of deposits banks can lend and set limits on new investment in luxury real-estate projects.

Underlining official concerns over the economy, Chinese President Hu said the government "must thoroughly control" fixed-asset investment and "continue to strengthen and improve macroeconomic adjustments," state-run media reported. Mr. Hu told a meeting of Communist Party leaders last week that China will limit "blind expansion" in industries that are energy-intensive, polluting or plagued with overcapacity, the reports said.

China's property market is driven mostly by domestic spending. Foreign purchases of property totaled about $3.4 billion in 2005, according to Chinese government data. While precisely comparable figures weren't available, government data show that investment in residential property alone totaled about $165 billion last year.

But foreign spending has been growing, as both individual and institutional buyers pour into the market. Property accounted for the biggest portion of money that foreign private-equity investors sunk into China in the first half of 2006, some $105.87 million of a total $687.26 million, according to a report yesterday from research firm Thomson Financial. Thomson reported no such investment in the same period of 2005.

And foreign investment is spreading beyond well-known cities like Shanghai and Beijing. Last month, a real-estate unit of ING Groep NV said it would invest $22.4 million in a joint venture with a Chinese partner to develop residential and other projects in the central city of Changsha.

Analysts say foreign investors have a reputation for paying more than locals, a factor that can amplify the impact foreigners have on broader market pricing expectations.

Beijing is worried partly that enthusiasm from overseas investors is pricing many Chinese out of the housing market and fueling inflation, analysts say. With the new rules, China's government is "encouraging long-term investment in a controllable way, instead of short-term investment that might disturb the regular market order," said Frank Jiang, head of advisory services at Shanghai Urban Real Estate Appraisal Surveyors Co.
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Joined: 08 Oct 2006
Posts: 1

PostPosted: Sun Oct 08, 2006 9:05 am    Post subject: Real Estate in Asia Reply with quote

I enjoy reading your commentaries. They are very informative, and interesting.
I want to ask you if think, that real estate in Asia is still a growing market, if it's still a good investment. Or the sepculation brought by the foreigners will lead to more measurers, and slow even more the real estate market.
I know that the population in certain locations are putting pressure to the government.
Thanks in advance
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