China considering property restrictions for foreign buyers

China is set to tighten restrictions on foreign real estate investment, according to a statement from the Chinese Ministry of Commerce (MOC).

The MOC has asked local authorities to increase supervision on property investment involving foreigners and strengthen risk controls on the real estate sector.

The statement stipulates that foreign funded developers will not be allowed to make profits through buying and reselling real estate projects.

The MOC also stated that it would strictly monitor all transactions in conjunction with the Ministry of Land and Resources and the State Administration of Foreign Exchange.

There is also like to be more tax reforms relating to the real estate sector. China will expand a pilot property tax programme in 2012 while speeding up resource tax reforms, according to Finance Minister Xie Xuren.

Chinese officials have said a pilot property tax programme in Chongqing and Shanghai will eventually be extended to the rest of the country to help cool rising house price rises.

Debate over the country's property-market controls is increasing, as some government figures urge a partial loosening of restrictions in the key sector amid repeated statements by the central government that curbs must be maintained so as to bring soaring property prices down to more reasonable levels.

While Beijing, Shanghai, Qingdao and Haikou have decided to extend home purchase limits and continue property tightening measures this year, other local governments are mulling measures targeted at aiding first time homebuyer demand while maintaining an overall tight stance, the newspaper said.

Local governments, which depend on land and property sales for tax revenue, aren't keen to carry out the tightening measures because of the resulting lower revenues due to weaker land prices and housing sales.
The measures include limits on home purchases, higher down payment requirements for people buying additional homes, stricter mortgage rules and restrictions on financing for developers.

But property sales have declined substantially in major cities from a year ago, and average property prices in China fell month on month in November for a second consecutive month as Beijing's two year old tightening campaign started to bite.

In October, Foshan in southern China's Guangdong province reversed a decision it had made to partially ease its property purchase restrictions, highlighting the struggle between the central and local governments.

China's prospects for economic growth in 2012 depend on whether the country can maintain stability in the property market, making government property controls necessary, China Business News cited Long Guoqiang, director general of the research department of the Foreign Economic Relations Development Research Center of China's State Council, as saying Thursday.

The stakes are high for Beijing to strike an appropriate balance, as property construction is a major contributor to economic growth in China.