China to curb foreign investment in property
New rules for firms and individuals come as govt steps up efforts to limit flow of 'hot money'
Prospective home buyers at a real estate fair last month in Chengdu, Sichuan. To cool the property market, China has already tightened rules governing down payments and suspended mortgages for third homes. -- PHOTO: ASSOCIATED PRESS
SHANGHAI: China is setting new rules that will limit foreign companies buying property in the country, as it steps up measures to curb the flow of 'hot money', according to reports in the Chinese media yesterday.
Under the new rules, foreigners living in China will be allowed to buy only one residential unit for their own use, the state-controlled Securities Times reported, citing a statement issued by the housing and currency regulator.
The news was partly blamed for a sharp sell-off in Chinese stocks yesterday.
Before making home purchases, foreigners will have to provide statements showing that they do not own other properties in the country, along with proof that they have been employed for at least a year in China, the newspaper said.
In addition, foreign companies will be allowed to buy offices only in cities where they are registered, the paper said.
The newspaper did not specify when the policy would take effect.
China's central bank raised bank reserve requirements this week to tame inflation and restrain foreign capital after the United States Federal Reserve announced further quantitative easing.
China has also tightened rules governing down payments and suspended mortgages for third homes. Last month, it raised interest rates for the first time in three years.
'The government aims to curb both property prices and speculative capital, and the measures may have some impact on both commercial and residential property in big cities, which see more foreign capital,' said Mr Du Jinsong, a Hong Kong-based analyst at Credit Suisse.
However, he added, much would depend on how strictly the new policies are implemented.
Requiring foreign buyers to provide home ownership statements is a first for China, he said. In the past, foreigners were able to buy multiple properties in different cities because ownership records were maintained locally, he said.
Last month, China's property prices rose 8.6 per cent from levels a year earlier - the slowest pace in 10 months, the statistics bureau said this week.
After the data was released, the Royal Bank of Canada said the Chinese government would want to see further easing of property prices and the 'policy bias' would be in favour of more interest rate increases.
Policymakers might introduce more measures in the fourth quarter amid signs of a price recovery, according to Nomura Securities in a report on Nov 4.
Measures likely to be implemented include a property tax and the enforcement of a land value-added tax - levied on real estate projects that have increased in value - in cities seen as being 'overheated'.
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