Can Foreigners Buy Property in China? Chinese Property Law

Has the thought of buying property in China ever crossed your mind? We certainly hear a lot about how many Chinese buy property and flood the markets in places like Canada, Australia, and most of South America. But you don’t hear much about foreigners doing the same over there, so it’s worth asking the question: can foreigners buy property in China? The answers might surprise you. Let’s work through some hard questions to clear up any doubts you might have.

Can You Own a House in China or Even a Piece of Land?

The short answer is yes, but there are some conditions to be able to do so. Chinese property law stipulates that foreigners can only buy one property at a time, and they either have to study or work in China for a full year before being able to do so. If you are living somewhere such as Shanghai or Beijing, you will be asked for additional conditions. You may also buy property from developers, an individual seller, or a real estate agency. Now this little rule here is the one that makes things trickier when you consider how the open market has been generous to China across the world, but according to Chinese property law if you are a foreigner or expat living in China, you can only buy property for dwelling purposes. You can’t buy a house or a condo to rent out the place. Owning property in China to manage as a landlord in the mainland is out of the question. On the other hand, there are no limits to the type of property you can buy, but this changes with the laws of every region.

The Hong Kong Controversy and Buying Land in China

One of the most ruthless regulations in Hong Kong is that foreigners are not allowed to buy, lease, or inherit land in Hong Kong, but you can “buy” land in mainland China. There is a big twist on it, though. All the land destined for public purposes is owned by the government. Therefore you can only negotiate with them to be granted a leasing term that can last up to 70 years. If for any reason you want to sell or negotiate your leasing term with a developer, it all goes through the motions of the estate to get approval.

The Price of a Property in China

As happens in many countries around the world, the price of any property is determined by the demand it has in the market. There has been a significant price surge in China in the most recent years, as its economy keeps thriving. Up until the trade wars started, there hadn’t been any substantial changes in the market. Places like Shenzhen, Shanghai, and Beijing keep being in high demand. We have to consider the fact that China is one of the most densely populated places on earth, and it suffers from the same evils that happen across the world. Many people want to leave the countryside and live in the big city. The only thing containing a mass migration to these places to live is the domestic passport system applied to the citizens of the nation.

The Relaxed Take of the Government with Alternative Financing

The conventional banking system is a nightmare to deal with in China. The banking system is centralized by the government and the six banks that work in the mainland answer only to the directives of the party. While a regular citizen will have it a little bit easier to buy property, foreigners will always have a more challenging time handling it. The rise of alternative methods of financing such as private lenders has not been dealt with by the government at the moment, and they have been a thriving enterprise for the people working on that side of the industry. Their dealings are what have increased the prices of properties, and the steps taken by the government so far have been forms of restrictions that can be easily navigated by being business savvy or by knowing the right people.

Do Foreigners Have a Right to Inherit Property in China?

This is not as tricky as other parts of owning property in the mainland. It applies to foreigners of Chinese offspring or foreigners with Chinese grandparents or parents who own property in China, or simply to foreigners that have relocated to China. Until not so long ago property owners had to introduce a notarized inheritance right document for approval, but the regulations on this have changed. Now the heirs have to prepare the inheritance documents and present them to the local real estate authority for approval. If the heir can’t make the trip to China, it can be handled by a local property solicitor to manage the process correctly.

Other Tidbits of Information About Real Estate in China

It’s useful to know some of these if you plan to face the complex real estate market of China, so make sure to remember them:

• If you plan to mortgage your property, you have to offer a down payment of 50% on the value of the asset. If you sold your house and you need a mortgage to buy a new one, you will be asked for a down payment of 70%.
• A transfer tax is set at 3 to 5%, depending on the location of the property as well as the commission charged by the real estate agent.
• The top percentage rate of a real estate agent never goes above 3% of the total sum of the sale.
• Land use tax must be paid by people who lease land; the fee must be paid annually over capital gains, and they will always be on a set rate of 5% if you own the property for less than five years.
• Real estate agents and lawyers are not a requirement to deal with the demands of the real estate market in China since the procedure tends to be very linear, but they can certainly help a lot if you are a foreigner.

So, now you should have a better understanding of whether foreigners can buy property in China. As you can see, owning property in China is not a walk in the park. We hope this brief guide can help you get your bearings if you plan on living in China or hope to have access to property in the mainland in the future.