China eases rules for foreigners in its real estate market amid worries over slow economic growth
Relaxing property restrictions aimed at lifting growth in key economic sector as authorities bid to stem capital outflows after yuan devaluation
The mainland has relaxed foreign investment restrictions in its once-sizzling real estate market as worries mount on capital flight in the wake of a weakening yuan and slowing economic growth.
Six governing ministries, including the central bank and the commerce ministry, issued a statement scrapping previous rules that required foreign property investors to pay the full amount of registered capital for their mainland entities to mainland authorities before borrowing any loans or applying for foreign exchange transactions.
"The move seems to be aimed at discouraging capital outflow after the devaluation of the yuan," said Alan Chiang, head of residential in the Greater China region for global property consultancy DTZ.
"The move will offer an alternative for foreign corporates to invest if the government decides to stop the capital outflow."
But as concerns about the mainland stock market and the yuan linger, many industry analysts wonder if such incremental policy relaxations will help.
The mainland drew 18.5 billion yuan (HK$22.3 billion) of foreign investment in the real estate sector in the first seven months of this year, down 24.5 per cent from a year earlier, according to the National Bureau of Statistics. The first half saw a year-on-year drop of 3.9 per cent, indicating a steep decline in July. Foreign capital accounts for less than 1 per cent of total real estate investment.
The statement said foreigners working or living in the mainland could buy homes in the country for self-use but purchases should adhere to specific rules in the cities they are buying. The same applied to foreign companies.
Since the housing market cracked under a glut early last year, some mainland cities have been relaxing rules requiring foreigners to have been in the mainland for at least a year before becoming eligible to buy a local home, but only one.
"The latest rule is an endorsement of such loosening," said Lillian Duan, a Shanghai-based partner at global law firm DLA Piper, adding that foreigners who were not in the mainland or wanted to buy more than one home in the country may still need special certification.
Beijing has restricted foreign investment in the real estate sector since 2006 but after last year's market correction, the authorities began to quicken the pace of policy relaxations to treat property the same way as any sector vis-à-vis foreign direct investment.
Steven McCord, North China head of research of consultancy JLL in Beijing, said: "This is a carefully measured step that is happening at the right time to add a small boost to market demand."
Additional reporting Sidney Leng