Suggestion: Watch the 5 minutes video tutorial before reading this article
The media often speaks about how Chinese property buyers flood markets in countries like Australia and Canada.
We hear less about foreigners who buy real estate in China, where the property market has grown significantly in previous years. Much wealth accumulated among locals in the bigger city comes from real estate.
China might not be your best option for residential property investments and you have plenty of other options available in Asia.
Having said that, there are many foreigners who buy real estate for personal reasons in China and as they have resided in the country for a long time.
In this article, I explain how you can buy property in China as a foreigner, covering the main topics.
- Can foreigners buy property in China?
- The Process when Buying Property
- China Real Estate Websites
- China Property Prices
- Property Taxes & Fees
- Can foreigners inherit property in China?
Can foreigners buy property in China?
China has some of the strictest foreign property ownership regulations in Asia.
You’re allowed to buy one unit as a foreigner but have to study or work in China for at least one year before that. Additional requirements apply in Beijing and Shanghai.
But, you can buy property directly via developers, individual sellers or agents. This is not always the case in other countries.
You should also buy the property for dwelling purposes, hence you’re not allowed to rent out the property and act as a landlord.
For information about buying commercial real estate, I recommend you read my separate article.
Buying Land in China
Foreigners aren’t allowed to buy land in mainland China nor in Hong Kong. Instead, you have to lease land with a lease term of up to 70 years.
Urban land is owned by the government and you need to sign a land grant contract with the land administration department in the county where you plan to lease land.
Land cannot be owned on a freehold or private basis in China and regulations are similar as in Vietnam. Instead, the land is collectively owned by the people and administered by the state.
The Process when Buying Property
Below I’ve included some of the key steps when you buy or sell property in China.
Find a real estate agent
Although not legally required, I recommend hiring a local real estate agent who understands local regulations and the market.
Agents can be found on the internet or through contacts. Be sure to do due diligence to assure that the agent is serious and has a proven track record of helping foreign buyers.
Submitting an offer and paying the deposit
When you have found a property that suits your needs, it’s time to prepare the offer.
Once agreed with the seller, you generally pay a deposit of 1% of the purchase value to book the unit.
Sales & Purchasing Agreement (SPA)
The next step is to prepare the Sales & Purchase Agreement (SPA), including details such as:
- The selling price
- Payment of taxes
- Payment instalments and payment terms
- What will happen if a party can’t fulfill any of the conditions
When the buyer and seller have signed the SPA, an amount equal to 20% to 30% of the purchase price should be paid. This also has to be notarized.
Registrate the contract at your local police station
You should also join a mandarin speaker, going to the local police station where you live, and register a copy of that contract. This can be done with the help of your agent.
Signing a new contract with a government official
You need to register the purchase at a government level, a new contract should be signed, witnessed by a government official.
Transferring the title deed
Finally, the deed should be transferred from the owner to the buyer.
A scrutiny check of the title is very important to assure that there are no hidden mortgages, liens, or encumbrances attached to the property.
The transfer of the title is made at the Deed and Title Transferring Office one of the property exchange centers, located in the city where you intend to buy (referred to as 房地产交易中心 in Chinese).
Receiving the contract number
Your agent should submit the contract online in order for you to receive a contract number, proving the property transaction.
The same as I’ve explained in my article about buying property in Vietnam for example, it’s important that you assure to receive a bonafide certificate of ownership.
China Real Estate Websites
China has a significantly large real estate market and many listing websites have popped up over the years. Some of the most popular listing sites in China include:
For Chinese overseas property purchasers, Juwai has undoubtedly become one of the major players. Basically referred to as “reside overseas”, the website target Chinese investors who want to buy real estate globally.
You can also search around on the internet to find other options. A real estate agent can also help you to find a property that suits your needs.
China Property Prices
Property prices have surged in China in the past years, especially in bigger cities like Shanghai, Shenzhen, and Beijing.
It’s not strange in a country with almost 1.4 billion people, where younger people want to urbanize and move to the bigger cities (although there are restrictions to work and buy property in different provinces, as China has so-called Hukou’s (户口本), similar to domestic passports or identity cards).
Sure, the Chinese have become more wealthy thanks to rapid economic development. But the surge in housing prices is mainly to blame on generous housing loans, not to neglect the shadow banking, that’s now equally big as Mexico’s economy.
Cooling measures by the government
While shadow banking is harder to control, the government is doing its utmost to cool the property market, by putting restrictions on the number of properties you can buy, or the downpayment for first and second purchases.
Beijing and Shanghai (and recently Shenzhen) are some of the cities where property prices have increased massively, the main reason why people have got better off.
Did you see that guy driving by in a new Ferrari? There’s a great chance he could afford it thanks to the property he bought or inherited a decade ago.
Prices have become unreasonably high
One of my old colleagues often showed me property prices on his cell phone with a grin on his face.
Xujiahui, one of the most expensive areas in Shanghai, where I used to reside, has seen prices reaching USD 16,000-18,000 per square meter.
Property has become unreasonably expensive in the big cities, a trend spreading to many second-tier cities as well.
As the Chinese prefer to invest in real estate rather than stocks, the market has continued on its upward trajectory trend.
In 2021, it was announced that Beijing’s luxury home prices had surpassed that of Hong Kong for the first time, which is kind of astonishing.
Invest in smaller cities or areas with investment in infrastructure
For now, you better stand on the sideline or target areas in second or third-tier cities, where prices haven’t increased so much (for example Wuhan, which has better growth potentials).
Of course, unless if you have sufficient finances and buy for personal reasons.
Everything comes down to what you want from your investment as well. Maybe you have a family in Shanghai and really need an apartment there.
You can also find good investment opportunities in areas and districts that will get more connected with central areas, or even other cities.
Just giving an example: Songjiang, a district located in the suburbs in Shanghai, is a place where my Chinese friends had a keen interest to buy property.
Strategically located between Shanghai and Suzhou (another major city), the area around Songjiang has much water and green areas, it’s been sparsely populated.
Now, there’s a new subway line connecting Songjiang to Suzhou, increasing the demand for property.
Downpayments required for China property
If you want to mortgage property, you need to pay a downpayment of around 50% on your first property, for locals, a hefty down payment of 70% is needed for second-home buyers.
These are signs of cooling measures and to reduce speculation in the market.
Property Taxes & Fees
Below I’ve summarized the taxes you need to pay, either as a seller or buyer. Confirm the rates with your agent for up-to-date information and to avoid hidden surprises later.
The transfer tax is 3% to 5%, depending on the location of the property and the commission paid to the real estate agent.
The stamp duty is 0.05%, which is comparably low to other Asian countries. Keep in mind that the transfer tax makes up a comparably large amount though.
Real estate commissions
Real estate agents typically pocket commissions between 1% to 3%, depending on the property value.
Land use tax
Land use tax applies to persons who lease land, rates stretch between RMB 1.5 – 30 per square meter in Shanghai. You need to pay the tax annually.
Capital gains tax
The capital gains tax is 5% if you own property for less than five years.
Property tax is not levied in China, except for pilot projects introduced in Shanghai and Chongqing.
In Shanghai, property tax has been levied for persons not resident in Shanghai and to local second home buyers, who bought property above a certain size. The rate was set to 0.4% to 0.6% on 70% of the original property value.
In Chongqing, a tax rate of 0.5% – 1.2% was levied to the following categories:
- Properties with a value two times higher than the city’s average price
- Villas in the major 9 districts
- Procurements of villas in the 9 major districts
Can foreigners inherit property in China?
A common question is whether foreigners can inherit property in China.
Previously, property owners had to do an inheritance right notarization. Now, heirs simply have to prepare the inheritance documents needed and present these to the local real estate authority.
If the heir is not capable of visiting China, he or she can also seek help from a local property Solicitor to help with the process.
Notarization of inheritance in China
As the inheritance of property can be a somewhat complex process, especially in a foreign country, you need to hire a Solicitor to help you through the process.
Documents needed for a notary to pass a property from a deceased person to a foreigner include:
- A certificate of identity (normally your passport)
- A death certificate of the deceased person
- A certificate of kinship
- Document proving the inheritors
- Certificate of ownership (if applicable)
- Original version of the testament (if applicable)
- A signed marital property agreement (if applicable)
- A waiver showing the right to inherit (if applicable)
- A notarized power of attorney
China has one of the most overheated real estate markets globally and prices have gone through the roof in recent years.
It’s not rare that units fetch as much as RMB 100,000 – 150,000 per square meter in places like Beijing and Shanghai, making the price-to-income ratio greatly unbalanced.
Yet China has attracted increasingly more entrepreneurs and business leaders, resulting in more foreigners that want to settle here for privacy reasons.
Besides, many overseas Chinese in places like the US look for a place to stay in their home country, seeking back to their roots.
Looking at the regulations, foreigners are allowed to buy one property for dwelling purposes in China. But first, you need to either work or study there for one year.
The buying process can seem daunting but is pretty straightforward as soon as you learn the basics and work with a credible local partner.
It’s worth highlighting that real estate cannot be owned on a freehold basis, but only on a leasehold basis. You’re allowed to lease land for up to 70 years.
For more information, I recommend you read the whole article or write a comment below if you have any questions.