To tame record high property prices and control inflation, the government has tightened bank lending to domestic property developers and introduced a long debated property tax in Shanghai and Chongqing.
The latest version of the Catalogue Guiding Foreign Investment in Industry lists foreign investment in the construction and management of villas in the prohibited category. It was previously in the restricted category.
But some experts dismissed it as a mere gesture. ‘There will be some impact, but it will not be very big,’ said Albert Lau, managing director of Savills Shanghai. He said foreign exchange curbs and difficulties in acquiring land already limited some foreign investment in villas.
‘This is just a gesture you see from time to time. Supposedly if you want to cool the market, you should increase the supply. It is counter intuitive to try and limit money going into the sector,’ said David Ng, an analyst at the Royal Bank of Scotland.
The state planning National Development and Research Commission and the Ministry of Commerce announced the planned revisions late last week to solicit public opinion via email before the end of April.
The new rules will make it more difficult for foreign firms to enter sectors that Beijing is trying to rein in and marks the latest policy initiatives by the government to restructure its economy and direct investment to priority sectors.
The US-China Business Council had recommended the government move the real estate secondary market to the encouraged category and allow foreign majority controlled ventures and wholly foreign owned enterprises to participate.
But according to global real estate consultant Jones Lang LaSalle foreign players are unfazed by China's policy tightening spree and returning to invest in troubled domestic developers or buy distressed assets.
Foreign investors outside Asia accounted for a record 33% of China property investment in 2007. That more than halved in 2008 to 12%, before falling to a mere 2% in 2009. The ratio has recovered slightly since, rising to 7% last year, Jones Lang LaSalle said.
China's housing ministry said that out of the country's 657 cities, 608 of them, or 92.5%, have announced their property price control targets after they were told to set property price control targets by the end of March as part of efforts to fulfil the State Council's measures to cool the country's real estate sector.
The housing ministry didn't elaborate on whether these targets met the central government's expectations. The Beijing municipal government's target appears to be the only one that is in line with the central government's aim of reining in price increases, saying that it is targeting a flat to moderately lower prices for new residential properties this year from last year and has pledged to boost efforts to safeguard the public housing sector.
