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Desperate Beijing suspends restrictions for foreign property investors

As part of a wide range of moves, the municipal government announced it has suspended measures introduced in 2007 to limit the number of foreigners purchasing residential property in the city.

Under the rules only expatriates who had lived in Beijing for at least a year could buy a house, and they needed to prove they would be the primary users of the property. The restriction was designed to stop foreign capital from creating a property boom.

But with prices falling last year and predicted to drop by 20% in the next few months officials have come up with a range of ideas aimed at boosting the property market.

Before the 2007 regulation, foreign purchases accounted for 7 to 8% of real estate transactions in Beijing. After the regulation took effect, the number dropped to less than 1%, according to Li Wenjie, general manager of real estate agency Centaline China.

It is also a sign that interest rates cuts intended to boost the property market in China have not worked. Analysts point out that residential property remains too expensive for ordinary Chinese people.

The government has scrapped stamp duty for home buyers and sellers, abolished value-added tax for sellers and lowered urban property tax for foreign buyers. It has also lowered deed tax to 1%.

Other measures taken recently include lowering downpayments to 20% of a property's value from 30%, and cut the minimum commercial mortgage rate to 70% of benchmark lending rates, down from 85%.

The central bank has cut interest rates five times since September, bringing the benchmark lending rate for loans of above five years down to 5.94% from 7.83%, but property prices continue to decline.