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Adventures in real estate

Thanks to worries that China's economic growth may be slowing down, the restrictions on property purchase for foreigners have been lifted.

It's only recently that expats have been allowed to invest in property in China, the regulations changed in 2015. Before this date, expats could only buy property for personal use. This rule has been abolished, as have the restrictions that banned foreigners from house purchase unless they had lived in China for a year. Though restrictions are still in place in Shanghai and Beijing, where foreigners are ‘still only able to purchase a single property.'  

A changing market

According to our 2020 Global Housing Market Trends report, China saw some of the biggest decreases in housing prices due to the COVID-19 pandemic. As COVID-19 originated in China, it’s understandable that the coronavirus has impacted the country’s housing market.

For the report, we analysed rental and purchase data from 2015 to mid-2020. The metrics used were:

  • Price-to-rent ratio – the average cost of ownership divided by estimated rental cost. Higher values suggest that it is better to rent rather than buy
  • Price-to-income – a ratio of apartment prices to average disposable income. Lower values mean more affordable housing
  • Mortgage as a percentage of income – a ratio of mortgage costs to take-home family income. Lower values mean more affordable housing.

Since the pandemic began, the purchase market in China saw prices fall. Despite projected growth, the relative percentage change between mid-2019 and mid-2020 was -5.1% for mortgage as a percentage of income and -6.2% for price-to-income.

Aetna International Global Housing Market Trends Graphic for China between mid-2019 and mid-2020 Aetna International Global Housing Market Trends Graphic for China between mid-2019 and mid-2020
Aetna International Global Housing Market Trends Graphic for China between mid-2019 and mid-2020 Aetna International Global Housing Market Trends Graphic for China between mid-2019 and mid-2020

This may explain the news reports from 2020 that show how house sales are booming in China – probably due to buyers taking advantage of affordable mortgages. However, renting in city centres has become dramatically more viable than buying in the last 12 months. In fact, price-to-rent ratios both inside and outside city centres saw increases.

Buying a house

If you do want to buy a house in China either get in touch with a developer or agent. Purchasers who want to buy an older property should realise that if the government wants the land on which the house is built, then it can make a compulsory purchase order on your home. Residential land is leased for 70 years, which means that no one in China has total ownership rights.

As soon as you’ve been in contact with the agent or developer about your chosen property, then you’ll have to submit a formal letter detailing the price, and the payment schedule. Once your offer is accepted, you’ll then have to pay 1% of the house price.

Applying for a mortgage

It is possible for expats to get a mortgage from a foreign-owned bank in China and the loosening up of the property ownership laws means that you won't have to pay registration fees when taking out a bank loan for the purpose of property purchase. Once the finance is in place, the agent or lawyer will check the property and the documentation and ensured that the sale is valid, and both parties can draw up an ‘official sales contract,' this is when the buyer will have to pay a further deposit of 30%.

The contract must be notarised if you’re a foreigner, and once this procedure is completed deeds will be transferred from the buyer to the seller. As soon as all of the legal transactions have been completed the remaining 70% of the purchase price will be due.

Buying a house in any country is a complicated business; if your knowledge of Chinese isn't fluent make sure that a bi-lingual legal representative translates every stage of the process for you.   

If you’re thinking of settling and working in China, contact us for health care provision and advice.

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