Foreigners difficult to buy house in China

08:19, August 02, 2010      

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Buying a house in the city you adopt is a major commitment. In China, that decision may embroil you in situations you never imagined. Shi Yingying examines the pros and cons.

While local residents complain about escalating property prices from Guangzhou to Beijing, the comparative value for money still tempts foreign investors, especially those who have lived and worked in Chinese cities for a long time. With China's growing importance as a major international financial power coupled with the property boom post-Olympics and post-World Expo, more and more foreign buyers are considering riding on the dragon's tail. What holds them back, however, is the bizarre paperwork, the obscurity of the Chinese real estate market and ever-changing regulations and controls.

"Those not really committed simply avoid the mess and just rent," said American David Sutton, who has gone through the process of buying and selling properties in Shanghai and Sanya in Hainan. "Foreigners who buy here are more committed to China and they believe it is worth taking the risk."

But for those who are unfamiliar with the minefields in real estate, they may end up getting into trouble, like Christopher Palmer did.

Palmer had already put a down payment on his Baoshan property in 2008 and completed all the necessary paperwork. But, the bank refused to complete the transaction for the mortgage because it said Palmer did not have the proper visa. He was on an L or tourist visa.

"They sprung this on me after I had signed the contracts," said the 35-year-old American who works as an English teacher in Shanghai.

"I understand they want to make sure I will stick around but they had seen all the visas and they knew I had been here for several years, and would not be leaving anytime soon."

While Palmer's frustration is understandable, his story emphasizes the importance of doing enough homework before commitment. The expatriate wanting to put down roots must meet one fundamental principle.

"They must have lived in the city on a residence permit (known as the Z visa) for more than one year ahead of the date of purchase, according to the Opinions on Regulating the Access to and Administration of Foreign Investment in the Real Estate Market (Decree No 171) issued in 2006," says Liu Si from the Real Estate Trading Center in Luwan district.

Related legal documents must also be submitted. These include the work contract, work permit or the proof of one's status as student. All these also need to be notarized, if they are not already in Chinese.

"Imagine a foreigner coming into your country with the intention of buying an apartment with only a tourist visa. Do you think it should be allowed?" Liu says. "This is China, and if you want to buy a property here, you have to follow the proper procedures."

There may be other restrictions, depending on the city. In Shanghai and Beijing, foreigners are only allowed one residential property each.

"The property is to be used for living in and buyers here are required to sign a letter of commitment, stating they wouldn't buy more, with the signatures of their official Chinese names (this can be arranged at the notary office if expatriates don't have one) on the paper," says Liu.

At least property buyers in Shanghai and Beijing can refer to the set of guidelines. Expatriates in Sanya are less lucky.

"The lack of standard, consistent information is a major problem, especially in Sanya. It seems to be very arbitrary," says David Sutton who bought a 209-square-meter ocean-view apartment and had an unpleasant encounter with the local real estate agency.

"Sanya is an outlaw frontier," says Sutton. " I found that the real estate agents' main concern was how to make the most money. They do not serve as advocates for their clients, neither buyer or seller and they are looking out only for themselves. Don't even think of getting into this process without some help of a Chinese friend whom you trust."


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(Editor:王寒露)

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