BEIJING - For
many foreigners, investing in property in China
isn't easy. Just ask Tom Luckock.
Luckock,
a 32-year-old Australian lawyer who has lived in
Beijing for six years, owns two siheyuan -
or four-sided courtyards - tucked away in
Beijing's historic hutong alleyways. He
bought the first 190-square-meter home two years
ago after four years of searching and several
collapsed deals.
Last year, Luckock bought
the second, a 326 square meter siheyuan,
after negotiations with five owners and a title
dispute involving illegal squatters. He was forced
to buy the property in his
fiance's mother's name to get
around a new regulation restricting a foreigner
from owning more than one house in the capital
city. Along the way, Luckock faced challenges
ranging from price and location to disputes with
builders and neighbors.
"It's a long-term
investment," Luckock says, "but a risky one."
Not only do foreigners like Luckock face
the significant cultural and practical
difficulties of buying property in China, they
must also battle recent legislation designed to
limit foreign ownership in order to tame a soaring
real estate market.
Early this year, a
regulation was announced, echoing similar central
government efforts in 2006, requiring foreigners
living in Beijing to get certificates from the
Beijing Municipal Public Security Bureau to prove
they have been in China for at least one year for
work or study before buying property. The
regulation also banned foreigners from buying more
than one house or using it for anything other than
residential purposes.
"It is
understandable for the government to rein in
foreign investment in the property market when
supply can barely meet the huge domestic demand,"
says Eric Chan, deputy managing director of
Savills, a UK real estate services provider.
The rule was a follow-up to a previous
attempt by the government to curb speculation in
the property market. In July 2006, six ministries
led by the Ministry of Construction issued a
statement requiring foreigners to live in China
for at least a year before being allowed to buy a
house. But once it became clear that the statement
did not include any measures for enforcement,
property developers in the capital once again
started accepting subscriptions from foreign
buyers.
The government has also clamped
down on overseas residents - including those from
Taiwan, Hong Kong or Macao, as well as overseas
Chinese - from buying property on the mainland.
As of last January, overseas residents
looking to buy property in Beijing require a
residential status certificate. To get that, they
need to provide a passport, documents to prove
they have worked or studied in Beijing for over
one year, papers verifying their present address
and two passport-sized photos. Overseas residents
also now require a signed testimony saying they
will live in the house and not rent it out or sell
it.
Chan said that the rules are not meant
to prevent foreigners from buying houses for their
own living purposes but are to curb investment
demand, particularly among commercial investors.
Though the process has become more complicated,
Chan said foreigners' demand for housing remains
strong.
"I've talked with many foreigners.
Most of them show great interest in China's
property market, despite the restraining
measures," says Chan. "Just think about it - there
are more than 100,000 foreigners living in
Beijing, and the number is growing, helped by the
expansion of multinational companies."
He
suggested that the government should expand
investment channels for foreigners while curbing
their investment in the property market. Others,
however, argue that foreign investment has not
been a large contributor to rising property
prices, and that their involvement in the market
should actually be welcomed, not discouraged.
"There's a sentiment that foreigners are
driving up the real estate market, but in reality
there's an excess of liquidity in the market and
high demand for real estate in general," said Anna
Kalifa, head of research, Beijing, for Jones Lang
LaSalle, a leading global real estate services and
money management firm.
Foreign buyers,
including commercial and private investors,
account for just 5 percent of China's real estate
sector, and they are largely concentrated in the
luxury market, Kalifa said. The causes of soaring
property prices in recent years have been
deregulation, membership to the World Trade
Organization, excess liquidity in the market, high
savings rates and a need to invest, she said.
China should welcome foreign investment in
the real estate sector as it increases
transparency and the availability of public
information, and it institutionalizes real estate
investment, including best-practice standards and
a better legal framework, she said.
Despite the new regulations, foreign
investors - both institutional and individual -
remain hungry for a piece of China's real estate
market, especially in cities like Beijing.
"It's recognized that Beijing is an
international city," said Luckock, "and part of
being an international city is that foreigners own
property in that city, just like in London, New
York and elsewhere."
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
