The price of property has gone up significantly in most developed and developing countries of the world over the last decade. China is no different, and buying property in some of its biggest cities could prove to be a sound investment. However, thanks to China's murky laws and policies, buying property in China as a foreigner is a bit of a bureaucratic ballet. Let's take a look at the ins and outs……
It goes without saying that you'll need a small fortune to even consider buying an apartment in China, unless you're thinking of settling down in a rural village. Buying an apartment in a central part of Shanghai will cost you a staggering 15,000 USD per square meter on average. If you're willing to compromise and buy right on the outskirts of the city, you could probably get away with less than 7,000 USD. These prices are easily on par with many of the most expensive urban centers in the developed world.
And no, don't expect Chinese banks to happily grant you a loan for the down payment. And yes, the down payment will be around 30 percent of the purchasing price. As for the home loan, be prepared to accept some pretty steep mortgage rates and alarming clauses in your contract, including, but not limited to: “A Letter of undertaking to state that you are fully aware of and are willing to take the risks due to any possible regulation updates, including the amendment and/or cancellation of our facility without your confirmation (for expatriates only)”, as seen on the HSBC website.
In summation, expect to pay 30 percent of the property value up front and to pay back your loan within 30 years. Also be aware that you may or may not be evicted and lose the rights to your property should the regulations happen to change during that time period. And if you do get evicted, the amount the government will pay for the property may be less than its actual market value. The problem is, there are too few examples of this to create any sort of reliable empirical evidence.
Legal and paperwork
The legal paperwork involved in buying property in China as a foreigner is far more complex than that of most Western countries. As an expat, you need to prove that you're legally working in China and have lived in China for more than 12 months.
It's customary to hire an agent to do most of the legwork of finding and securing an apartment. This makes the entire process a more personal affair, as you must find a trustworthy agent, and create good guanxi with him/her. Thankfully, these agents will also deal with the worst of the paperwork for you, but be prepared to pay for this help.
After finding an apartment you want to buy, you have to draft a contract and negotiate the price, payment schedule and all other relevant aspects of the purchase. Doing this without an agent is not recommended.
If the seller agrees, you'll be expected to pay a good-faith deposit, usually one percentage of the total price. After that's done, you need to notarize the contract and have it approved by the Chinese government.
Expect to pay several percentage of the total purchasing price in taxes when buying, registering and transferring the deed. Local government rules and regulations, if any, will apply.
The land-lease and land-use rights
You might have heard a rumor that the government owns all the land in China, and they merely lease it for 70 years at a time to citizens and businesses. In reality, it's actually all true! But it's also a lot more complicated than that. These regulations were first amended in the Chinese Constitution's Amendment Act of 1988, making the earliest expiration date of leased land somewhere in the late 2050s. As we're not there yet, no one can say for sure what will happen.
These land-use rights are expected to be renewed, and if you're worried about this, don't be. If the Chinese government decides that they need the land where your property is located for any reason, they can still evict you. If that happens, you will be compensated. However, if the land-use rights owner doesn't reapply for the land-lease one year before the expiration date, the government can take the land without compensating those using it.
In summation, you can own your home in China, but not the land it's built on. And it pays to keep up with your paper work.
When you sell
Selling an apartment in China is very much like buying one, but in reverse order, duh. As with the acquisition, everything is best handled by a reputable agent. Expect to pay transaction fees, land-use tax and a number of other minor costs as a seller.
If you want to transfer the money out of China, you may do so, granted you have proof that the money came from selling a property you own. You'll also need to have it approved by the State Administration of Foreign Exchange.
This is by no means a complete guide on buying property in China, and it would take months of studying to fully understand the legal and financial framework surrounding this topic. The truth is, if you're financially viable enough to buy property in China, chances are you'll also be able to hire someone to do the grunt work for you.
Would you ever buy property in China as a foreigner? Tell us in the comments section below.
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I know three foreigners who have bought houses and 1 who bought and owns a training school.....Actually, they could not buy them by themselves, they had to have their Chinese wives parents buy them and of course pay them back. I did buy a car in my own name, but that's a totally different matter.
Mar 24, 2018 12:05 Report Abuse
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