New policy in China for curbing property market: companies banned from buying

In the past a couple of days, four cities in China, Shanghai, Xi'an, Changsha and Hangzhou, has announced that they will restrict corporate entities in purchasing local properties, a new round of efforts in reining in local property market.

For a decade, China (mainly the central government) has been wrestling with property markets. On one hand, the governments do not want the property market to get too hot with prices getting out of reach of majority of the people, and on the other hand, the governments heavily rely on property revenues (land sale fee, property transaction taxes)  to power the country's economy. So government policies always change with the climates of the China property markets.

In the recent past, the major measure that has brought about meaningful control is the restrictions imposed on purchase by people, and limitations on the availability of financial support for home buyers. All major cities in China have put in place similar polices to ensure local property markets won't go out of control.

Despite the hard stance of governments on property markets, only since last year have people seen the cooling down of the properties in the first-tiered cities like Shanghai, Beijing and Shenzhen.

However the plausibly tight control and regulation has indeed a loophole that is seemingly kept there intentionally by the local governments: companies are not restricted from purchasing properties even residential properties. So in practice, many people start flipping properties through companies though mortgage loans are not available to corporate property owners but with Chinese people's overwhelming enthusiasm and love for property investments, it is not too much a difficulty in amassing private money to set up private funds or companies to buy properties. News has disclosed that a large number of China listed companies hold investment properties.

So with new move to prevent companies from buying properties shows a more sincere stance toward property market regulation.

Maybe it is too early to be optimistic as only a few cities have now implemented the policy. Shanghai that was said to be one of the few cities has not issued any official announcement or notice thereof. It was found in a publication from a local district government in Baoshan. This means that such restriction on corporate buyers may and can be easily and readily lifted if the local governments feel the real pinch of a contracting property market.

Let us wait and see what will come next.

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UPDATE ON JULY 5

Here is what was just published on July 2 by Shanghai Housing Authority regarding the detailed rules for corporate buyers in local Shanghai property market.  We reckon that this may have serious impact on the property market, further driving down the local property prices in Shanghai.

 

 

关于规范企业购买商品住房的暂行规定

Provisional Rules on Regulation of Purchase of Properties by Companies

 

一、企业在本市购买商品住房必须同时符合以下条件,购房时间以合同网签备案日期为准:

Companies that wish to buy properties in Shanghai shall meet all the following conditions, and the time of purchase shall be that of the filing of the online contract for the purchase:

1、企业设立年限已满5年;

the company has been in existence for up to 5 years;

2、企业在本市累计缴纳税款金额已达100万元人民币;

the company has cumulatively paid taxes up to RMB 1 million;

3、企业职工人数10名及以上,且按照规定在该企业缴纳社保和公积金满5年。

the company has more than 10 employees and has paid social insurances and housing fund for up to 5 years;

企业近年缴纳税款金额满500万元以上的,购房时不受上述企业设立年限和员工人数等条件的限制。

If the tax paid in recent years is up to RMB 5 million, the company is exempt from the conditions listed above.

二、企业购买的商品住房再次上市交易年限从“满3年”提高至“满5年”。

company that purchases properties shall not sell the properties within 5 years.

三、住建、房管部门会同相关部门对执行商品住房项目公证摇号、按序选房制度加强监管,要求开发企业严格执行全部准售房源、积累客户规则和名单、摇号排序结果公证和公示规定;进一步加强客户认筹规则制订指导审核以及执行监管,严格落实企业购买商品住房规定。

四、住建、房管部门会同规土部门(不动产登记机构)加强企业购买、出售商品住房交易登记审核,会同税务、人社、公积金管理等部门建立相关信息共享核查机制,对违反企业购买、出售商品住房相关规定的,不予办理房地产交易登记手续。

五、本暂行规定自2018年7月3日起施行。

These provisional rules shall take effect from July 3, 2018.

Jason Tian

Jason Tian, senior partner, specializes in foreign-related legal services ranging from foreign investment in China, banking and capital, real estate, M&A, corporate, international trade, estate planning, inheritance and divorce at his blog: http://www.sinoblawg.com.

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