Tapping into China's Real Estate Market
May 2, 2013
By Tom Fearon
The "Chinese dream" of owning your own home has become increasingly elusive due to skyrocketing property prices, but this hasn't deterred some foreign investors from taking the plunge into the country's bubble-ridden real estate market.
Mountains of paperwork, complicated laws and uncertainty surrounding future housing controls, however, mean that thorough preparation is essential for would-be investors.
Tina Li, a partner at Greenpath Relocation and Real Estate Services in Beijing, says it's important for foreigners to avoid common pitfalls when buying property in China. One of the biggest surrounds the misconception of home "ownership."
Residential land is leased for a maximum 70 years under Chinese property law, although it's critical to confirm the length of the lease before inking any contracts.
"Some developers might have already kept the land undeveloped for over 10 years, leaving only 50 or so years in ownership to buyers," says Li, who has worked in Beijing's expat housing field for over a decade.
Foreigners wanting to buy in China must hold a residence permit, or Z-visa, for more than a year before purchase. This can be proven using work contracts or other official documents, with non-Chinese paperwork needing to be notarized. Another policy aimed at curbing overheating of the property market requires foreign buyers to sign a letter of commitment stating their purchase is for residential use and they won't buy more properties. Li stresses the process of buying property in China "just takes time and patience," acknowledging that "bizarre paperwork, obscurity of the Chinese real estate market and ever-changing regulations" can be daunting to foreigners .
Previously, a 30-percent deposit of the purchase price was required from foreigners buying property in China. However, minimum deposits were raised last year to varying levels in different cities, and banks have stopped approving medium- and long-term loans to foreigners.
Li admits the biggest cause for concern is skyrocketing costs.
"The high selling price is a major factor turning foreign investors away. But for those who have lived and worked in China for a long time, the comparative value for money is still tempting," she says.
During the house-hunting period, it's worthwhile enlisting the help of a close Chinese friend or spouse, to learn as much as possible about the neighborhood you plan to buy into.
Investigate levels of traffic noise, safety and pollution, as well as median home prices and local amenities. Most importantly, visit the local urban planning division to check thegovernment doesn't have any future development plans that could see the wrecking ball swing at your little slice of hutong heaven.
It's vital for all homebuyers in China to check for any red flags regarding the property they are interested in purchasing, Li notes.
"Construction quality generally remains below international standards," she says, adding that many properties' usable space is less than 70 percent of architectural space.
Once a buyer overcomes initial hurdles and all documents are processed, it usually takes another 45 to 90 days for home ownership to be formalized.
See the original article here.