Foreigners Can Only Buy a House in China

The international hot money is said to be invading China’s property market. In order to stop this, China’s watchdog plans to take measures.

It is known that the Ministry of Housing and Urban-Rural Development of China (MOHURD) and the China Security Regulatory Commission (CSRC) issued the Notice on Further Restricting Foreign Institutions and Individuals in Buying Houses (hereafter the Notice). According to the Notice, an individual foreigner can only buy a house for his/her own residence and the foreign institutions can only buy the non-residential houses as offices in the cities where they are registered.

The Notice requires the property management departments of different cities to check the qualification of house buyers in addition to the documents and housing conditions when they prepare the housing sale contracts and property registration for individual foreigners. The new contents include: the proof issued by relevant departments for the foreigner (people from Hong Kong, Macau and Taiwan excluded) who has worked in china for one year, the proof of people from Hong Kong, Macau and Taiwan for their working, studying and living in Mainland China, and the written promise made by foreigner about their having no dwelling houses in China.

The foreign institutions also have to be checked on their qualification when buying houses. They have to submit the approval documents and registration proof about their setting up branches or representative offices in a certain place. They also need to submit a written promise that the houses they buy are used as offices.

The Notice also requires the banks settling foreign exchanges for foreigners buying houses to make out strict examination over the documents submitted by foreign institutions and individuals. After settling the exchange for the house buyers, the banks need to make an instant filing about house buyers’ information in the foreign exchange management system of the State Administration of Foreign Exchange (SAFE) in close accordance with the national rules.

According to an insider from the SAFE, the Notice aims at preventing a large amount of hot money entering into China’s property market, which may lead to the chaos in the market.

It is known that the watchdog once issued the rules about restricting foreigners in buying houses. But the coverage was not as large as this time. In addition, individual foreigners were not included in the restrictions. Therefore, the issuance of the new rule shows the government’s concern over the damage hot money may bring to the property market.

According to the analyst from Midland Property, the new rule will apply influence over the housing prices in Beijing, Shanghai and Shenzhen. Presently, a certain amount of hot money has flown into Shenzhen and Guangzhou from Hong Kong. “Some Hong Kong people buy 30-40 houses for one in name of registering a company, which somewhat pushes housing prices in the Pearl River Delta higher,” said the analyst.