Trouble with the law
Clouding the water recently has been a new raft of property laws introduced by the Chinese Government. These are aimed at restricting foreigners who want to buy homes in the capital, and who have purportedly "driven property prices to exorbitant levels ordinary Chinese people cannot afford." An announcement jointly issued by six government ministries last July stated that foreigners must have studied or worked in China for a year before they are allowed to buy a home, and that newly bought homes cannot be used for letting or commercial purposes.
The hazy nature of the new laws meant that property sales for foreigners and foreign organizations came to a near halt at the end of 2006, boosting second-hand sales considerably. More recently it was announced that foreign home-buyers in Beijing must prove they have either worked or studied in China for over a year, and will only be allowed to purchase one property. Restrictions in the capital also apply to buyers from Hong Kong and Macao, although the Chinese Government has given no indication whether other cities will impose similar curbs.
Beijing has the Chinese mainland's largest population of long-term foreign residents, including tens of thousands of Western and Asian businesspeople, diplomats and students. The Chinese Government began allowing Chinese families to buy homes in the 1990s, and later let foreigners into the real estate market.
Jolyon Darker, a senior manager at Savills Beijing, comments, "Buyers need to be well aware of the nebulous legal framework in China where laws continue to change for foreign investors. Buyers should also question the length of time they intend to invest for, what is their exit strategy and will they require financing. Mortgage rates have been increasing quarter on quarter as the government attempts to slow the market."
A buyer's market
Elly Zhen, a Chinese journalist, is unaffected by the recent restrictions on foreign home ownership, and recently took the plunge to become a first-time Beijing homeowner. She purchased a 100 square meter apartment in Zhujiang Luoma Jiayuan, an "international-style" complex between the fourth and fifth ring roads in Beijing's Chaoyang District. By dealing directly with the complex's sales center, Zhen was delighted to negotiate a price of 7,000 yuan per square meter.
Although she describes her purchase as an "impulse buy", Zhen clearly did her homework before putting pen to paper. "Of course I spoke to other tenants in this building in this complex before I made a decision. I wanted to know how much they had paid and what the building management was like. One reason I chose this place was that I could move straight in. Buying property that hasn't been constructed might be cheaper, but it's certainly a lot more risky."
Zhen's investment seems to have brought immediate return, with her new apartment already valued at over 9,000 yuan per square meter. However, there were a few nasty surprises in store when she moved in. "I pulled back the curtain in the master bedroom to find a massive concrete beam blocking my view beyond the window. It's quite common in Chinese apartments to find such examples of poor design. I'm in discussion with the sales center about it at the moment."
It's not only apartments in modern apartment blocks that are being snapped up by Beijing's resident laowai. As the Chinese Government presses on with pre-Olympic beautification and zealous developers get busy with their bulldozers, Beijing courtyards or siheyuan have become increasingly rare and desirable residences. Available at similar prices to high-end apartments, after renovation these traditional-style dwellings can make comfortable, stylish and essentially unique homes.
However, buying a courtyard is an even more complex process than buying a regular second-hand apartment or villa. Some courtyard areas are protected, while others await a fate far less certain. Darker explains, "In addition to the worry of possible demolition, it is also quite common for a courtyard to have 7 or 10 owners. This often makes the negotiation process a bit of a nightmare."
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