China Property:Relaxation on foreigners'purchase not significant

Six departments jointly announced relaxation on foreign capitals and buyers.

    According to the official website of the Ministry of Commerce, as to pushforward the healthy and stable development in China’s property market, theState Council has agreed the adjustment on management rules over foreigncapitals’ entrance and foreigners’ purchase, which has jointly issued by the sixdepartments including MOC, Ministry of Housing and Urban-RuralDevelopment (MOHURD), NDRC, PBOC, State Administration of Industry andCommerce (SAIC), and State Administration of Foreign Exchange.

    The adjustments included: i) required ratio of registered capital to totalinvestment among foreign capitals developers will follow the piloting rulesunder SAIC; ii) removal of requirement for registered capital payment byforeign capitals developers for lending; iii) foreigners who are working andstudying in China are allowed to purchase commodity residential units for thepurpose of “self-use”. For cities that are under HPR, foreign buyers have tofollow the local regulations; iv) the six departments will further streamline theprocedures, enhance the efficiently, improve the management over foreigncapital developers. Foreign capital developers are allowed to register directly inbanks for foreign exchange, with immediate effect.

    Only marginally positive to the property market.

    In our view, the relaxation on foreigners’ purchase of commodity residentialunits is only marginally positive, mainly due to the reason below,First, in most of the Tier-2/3/4 cities (where inventory is a bigger problem, andprices are not rising), purchase restrictions for foreign buyers have beenpractically relaxed already. In addition, given the relatively large amount ofsupply in those cities and the lack of property price appreciations, we doubtwhether foreigners would be interested in buying in Tier-2/3/4 cities. As areference, Tier-2/3/4 cities make up over 90% of total sales volume for thewhole country.

    Second, in the Tier-1 cities (where there were more foreigners’ interests onproperties in the past), the home purchase restrictions still apply, and hence itwould still be difficult for foreigners to buy properties in those cities.

    In addition, there are keen foreigner’s interests on buying properties in China inthe past when RMB was appreciating, now RMB is depreciating, which in ourview would affect foreigner’s interests on China properties.