Foreign investors urged to do research first
Buyers considering buying a flat on the mainland should thoroughly research the project's location, building quality, and the country's tax system before signing a sales and purchase agreement, property agents say.
Alan Chiang Sheung-lai, the head of residential property at consultancy DTZ in China, said home-seekers tempted to buy units in uncompleted properties on the mainland were especially vulnerable to the possibility that show flats might not truly reflect the reality of finished apartments.
'It is vital to double-check floor plans, materials for interior fittings and when the units will be delivered,' he said.
Chiang said investors and end-users should also take into account whether the property was in an area where units were actively traded, in order to ensure an exit from the market if necessary.
'For investors, it is preferable to buy in first-tier cities such as Shenzhen and Shanghai, as it will be easier to resell flats in these locations in the future,' he said.
As buyers have to pay for the properties in yuan, they will also be required to seek approval from the State Administration of Foreign Exchange (SAFE) to remit foreign currency and convert it into yuan if they do not have the yuan available.
'It takes time to get such permission from SAFE. Buyers have to check if the developers or property agents will apply for them. Otherwise, they have to do it themselves,' Chiang said.
Change to the tax regime was another issue that buyers had to look into, said agents.
Beijing announced last week that the resale lock-up period for property, which had been shortened to two years under a series of stimulus measures last year, would now return to the original five years. This means owners must wait at least five years before reselling a property if they wish to avoid paying a 5.5 per cent tax on the proceeds.
Meggie Qin, the head of research in Beijing for Jones Lang LaSalle, said the location of projects and track record of developers should be noted by foreign buyers.
'Buyers should aim at prime locations,' she said, since this would ensure that they could earn a stable rental return and easily find a tenant.
'Buyers should also examine the track record of the developer. They have to know which projects it has developed, and they should also take note of who the managers of the project are.'