Property buyers face new regulation
By Fei Ya (China Daily)
Updated: 2006-06-14 09:08
New rules regulating the use of overseas capital in the property market are
imminent, according to Shanghai-based International Finance News, quoting an
unidentified source.
The State Administration of Foreign Exchange (SAFE)
previously announced that it would strengthen its monitoring of foreign capital
in the property market. But it did not mention whether such a rule is necessary
after the government issued a series of measures, including higher taxes and
down payments, to cool surging home prices last month.
While foreigner
investors claim that their interest lies in a general expectation of high
returns from a prosperous sector in a rapidly growing country rather than
speculation on the yuan's appreciation, local experts believe that speculation
on the exchange rate is still the main drive.
But there have been
growing calls recently for regulation of overseas capital in China's property
market.
"The government should control the flow of overseas capital, and
especially limit the short-term overseas capital's flow into China's property
market and manufacturing business," Guo Shuqing, director of the China
Construction Bank, said during the finance summit at the Ninth Beijing Hi-tech
Expo.
"China does not lack capital, so a rule regulating overseas
capital's entrance into the domestic property market is urgent," Xia Bin,
director of the Finance Research Center affiliated with the State Council's
Development Research Center. said.
SAFE figures show that foreign
institutions spent US$3.4 billion purchasing property in China last year.
Ministry of Commerce figures also demonstrate that China's property market used
US$1.497 billion of overseas capital in the first quarter of 2006, a 47.67 per
cent increase from the same period last year.
According to property
consultancy Jones Lang LaSalle, overseas capital had almost no access to
commercial building development in China before 2005.
In 2004, foreign
financial institutions including Australia's Macquarie Bank, Goldman Sachs
and Morgan Stanley spent a combined US$450 million buying four commercial
buildings in Shanghai.
Since 2004, overseas investors have been
increasingly lured to China's real estate market to earn money from rental and
property management fees.
The central bank's "China's Real Estate Finance
in 2004," published last year, reported that the proportion of overseas capital
to the total house purchasing capital in Shanghai had risen to 23.2 per cent at
the end of 2004, sparking media interest in foreign investment in the property
market.
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