China loosened restrictions on foreign investment in real estate after the yuan’s depreciation reduced the appeal of Chinese property assets.
Overseas companies’ Chinese units and foreign nationals working and living in China can buy properties for their own use that meet “real needs,” Chinese authorities, including the Chinese Ministry of Commerce, said in a joint statement.
Requirements that foreign investors should have paid their registered capital in full before borrowing local loans are removed, according to the statement, dated Wednesday last week.
Shanghai stocks closed up 4.82 percent yesterday, rising for a second day on strong US growth figures and a global market rally. The benchmark Shanghai Composite Index surged 148.76 points to 3,232.35. The Shenzhen Composite Index soared 5.4 percent, or 94.62 points, to 1,846.83.
The move came as China’s first major devaluation since 1994 this month made inbound investments, already damped by high property prices and a weakening growth outlook, “worthy of a careful pause,” realtor Jones Lang LaSalle Inc said.
The revisions to restrictions introduced in 2006 aim to ensure “stable and healthy” growth of the property market, according to the statement also jointly issued by the People’s Bank of China.
“It’s a substantial easing of restrictions on the central government level from the previous tightening,” said Liu Yuan (劉淵), a Shanghai-based research director for Centaline Group (中原集團), China’s biggest property agency.
“However, the actual impact might be small, as overseas buyers only make a microscopic proportion of China’s housing market,” Liu said.
Non-Chinese homebuyers accounted for 0.5 percent of existing-home transactions in Shanghai last year, according to Centaline.
The government’s 2006 rule, imposed after rapid foreign property investment and home buying, banned foreign citizens living and working in China for less than a year from buying a home in the country. Foreign investors setting up a property company were required to have a registered capital no less than half of their total investments, if they exceeded US$10 million.
“This is a carefully measured step that is happening at the right time to add a small boost to market demand,” Jones Lang LaSalle head of research for North China Steven McCord said by e-mail after the announcement.
However, “it is not the no-brainer purchase that it was 10 years ago,” he said, citing slower economic growth and the yuan’s depreciation. “It is now a major purchase decision for people who intend to live here.”
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