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China to relax property restrictions

Catherine Deshayes

These are extraordinary times, and everyone is feeling the financial strain. Now the Chinese Government has decided to introduce new measures to help shore up its property market in the midst of the global economic slowdown...

Whilst China's major cities have seen much interest from international investors over recent years, focus is now shifting away from the top tier cities in favour of smaller ones, such as Hangzhou and Chongging, which have fewer restrictions on foreign ownership.

With Shanghai and Beijing's real estate markets tipped for drastic slowdowns and price falls for the remainder of this year and next, the Government has decided to relax the restrictions they introduced on foreign investment in the sector.

Previously, restrictions prevented private investors owning second properties, but these are now expected to be lifted. Other changes are tipped to include a reduction of property taxes and an extension on mortgages for individuals.

The relaxed laws indicate that the Chinese Government is aiming to increase the low level of consumer demand, which started to tail off last year in the light of the slowing economy.

The recent Beijing Olympic Games were a massive drain on the resources of the country, with billions pumped into building new infrastructure and developments. This money is rarely recouped by the level of visitors attracted by the event, so China was left out of pocket.

Shares in many of the country's largest listed property developers have fallen more than 50 per cent from their highs of last year in the face of investor fears that some developers might go bankrupt.

Desperate developers are running exhaustive marketing campaigns in a bid to attract custom. The average annual growth rate of investment in July and August of this year fell to 19 per cent, from 34 per cent.

Liu Shiyu, Deputy Governor of the People's Bank of China, said that the Government will strengthen commercial real estate management and adjust the real estate credit structure to prevent risk.

These new changes follow the Government's promises in July of this year to relax rules governing overseas companies with Chinese capital seeking to invest in Taiwan, in a bid to make the country a regional financial centre.

Council for Economic Planning and Development Chairman Chen Tian- jy said, "Government agencies are working to relax restrictions to facilitate the return of Taiwanese firms based abroad to trade in the local bourse.

"In addition, the Government would allow Chinese capital to invest in Taiwan's service and manufacturing industries, including banks, restaurants, shops and commercial property," he added.

The downturn is not just hitting buyers, sellers and developers - more than 200 real estate agents in China have gone out of business since last year.

For cash rich investors not lying low, investing in China may now become easier with the relaxed laws. It already has property rights which include laws stating that the Government may not confiscate property without payment of compensation, and allows for claims to be made against the Chinese Government.

China also has dual taxation agreements with 78 countries, including the UK.

Picture by sxu