Suggestion: Watch the 5 minutes video tutorial before reading this article
Media often speaks about how Chinese property buyers flood markets in countries like Australia and Canada.
On the contrary, what many foreigners know little about, is whether you can buy residential property or land in a growing market like China’s.
In this article I explain the crucial info you need to know when buying, holding and selling property as a foreigner in China.
Can foreigners buy property in China?
You’re allowed to buy one property, but need to either study or work in China for at least one year before that. Additional requirements apply in Beijing and Shanghai.
You should also buy the property for dwelling purposes, hence you’re not allowed to rent out the property and act as a landlord.
There are no restrictions to the type of property you want to buy, which is not always the case. For example, in Singapore, where foreigners generally can’t buy landed houses.
Buying land in China
As foreigners can’t buy land in Hong Kong, it would be surprising if you can buy land in mainland China. Instead, you need to lease the residential land with a lease term of up to 70 years.
Urban land is owned by the government whatsoever, therefore, you need to sign a land grant contract with the land administration department in the county where you plan to lease land.
China property prices
Property prices have surged in China 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 through different means, for example, putting restrictions to the amount 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, a 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, have 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.
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, that has better growth potentials).
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 a buyer.
Is set to 3-5%, depending on the location of the property and the commission rate paid to a real estate agent.
The stamp duty is set to 0.05%, which is comparably low to other Asian countries.
Real estate commissions
Normally stretches between 1-3%.
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
Process when buying or selling 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 to hire a local real estate agent, who speaks the language and can help you through the selling process.
Agents can be found on the internet, be sure to do due diligence to assure that the agent is serious and has a proven track record of helping foreign buyers.
As mentioned above, agent commissions are usually set to 1-3%.
Submitting an offer and paying the deposit
When you’ve found a property, it’s time to come up with an offer.
Once agreed by the seller/buyer, a deposit of 1% of the purchase value should be paid.
Sales & Purchasing Agreement (SPA)
When you’ve found a buyer/seller, you need to enter a Sale & 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 has signed the SPA, he or she should pay an amount equal to 20-30% of the purchase price. This step also needs to be notarised.
Registration of the contract at your local police station
You should also accompany a mandarin speaker to the local police station where you live and register a copy of that contract.
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 bona fide certificate of ownership.
Real estate listings
Some of the most popular listing sites in China include:
You can also search around on the internet to find other options. A real estate agent can also help you to find property that suits your needs.
Can foreigners inherit property in China?
A common question asked is whether foreigners can inherit property in China.
May it be a foreigner that is of Chinese descent, and have grandparents or parents that own property in China, or foreigners that have simply started a new life and relocated to China
Previously, property owners had to do an inheritance right notarisation. But regulations have changed, heirs “simply” need 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.
Notarisation 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
Foreigners are allowed to buy one property for dwelling purposes in China, but first they need to either work or study there for one year.
Prices have increased much the past decade, especially in big cities like Shanghai, Shenzhen and Beijing. Second tier cities also see increased property prices.
The buying process is fairly straightforward, you’re not obliged to hire a real estate agent or solicitor, even if I recommend you to do so.
Taxes are fairly low, annual property tax is only levied in Shanghai and Chongqing, for example.
If you want to read more about how you can buy property in China as a foreigner, I recommend you to read the complete article.