China’s property sector took off in 1998, when Chinese citizens were granted the right to buy their own homes. Since then, according to an online market overview published by Property Frontiers, China’s property sector has seen an average rate of growth of 22% a year, fueled substantially by a large amount of investments flowing into the market,

The phenomenon has sparked fears that a property bubble is being created in China.

Consequently, the Chinese government placed restrictions on foreign investment in July 2006 as part of an overall effort to control the massive appreciation seen in recent years.

Michelle Gon, senior partner at the international law firm Baker & McKenzie, said that in order for foreign investors to acquire non self-use property in China, they must incorporate and capitalize an onshore entity in China, or foreign-invested real estate enterprise (FIREE), to acquire and hold investment properties.

Additional restrictions have been placed on specific segments of the real estate industry, such as development of whole tracts of land, construction and operation of luxury hotels, resorts, office-buildings and exhibition centers and second level-real estate market transactions, Gon said. Such efforts are not prohibited by law, but investors must obtain approval from authorities on a case-by-case basis.

The debt to equity ratio for FIREEs with a total investment of $10 million has also been reduced to 50/50.
Foreign individuals who work or study in China for more than one year can purchase self-use property, or property for their own use or residence.
Foreign entities with branches or representative offices in China in operation for more than one year may also purchase self-use property.

Although restrictions have made it more difficult for foreign non-resident private individuals to invest in China’s real estate market, large institutional investors are working within the rules of the system to provide a steady flow of foreign capital to China’s property sector.

Until China’s real estate market sufficiently cools down, it is unlikely that the Chinese government will lift restrictions on foreign property investment.
Source: New Investor

Reportlinker.com has announced a new market research report: China Real Estate Industry Report, 2007-2008.

The report is extensive and thorough. The summary covers only the high points:

Between January and August of 2007, China real estate development investment reached RMB 1.42 trillion, up 29%.
Its growth rate was up 5 percentage points year on year, 2.3 percentage points higher than that of urban investment at the same period.
The real estate investment occupied 20.4% of the urban investment, up 0.4 percentage points.
The completed investment in residential buildings in 2007 is up 30.9%.
The structure of housing supply begins to improve, but the proportion of the apartments below 90 square meters is still relatively low.
Statistics from 40 key cities show that the supply of the common commercial residential apartments below 90 square meters is rising month by month among newly-approved and newly-built residential buildings in those cities.
The average floor area of each approved pre-sale commercial residential apartment dropped from 122.3 square meters in July of 2007 to 106.95 square meters between January and August of 2007, but the average floor area per commercial residential apartment available in the market up to the end of each month is still around 114.03 square meters which is considerably above the 90 square meters which defines affordable housing.
The national completed area of commercial buildings was 208,346,500 square meters in August of 2007, up 10.1% year on year.

The summary shows the report comes to the conclusion that with stricter regulation and frequent interest rate increases the strong will become stronger. So the key real estate companies will see high growth of market performance as well as market share.

Even the summary, of which this is but a small part, is remarkably thorough and well worth reading in full.
Source: Business Wire

China’s commercial banks are keeping up with the enforcement of the government’s regulatory policies on real estate market.

Some banks said that they would be strict in implementing state policies on real estate and control the total amount of loans and optimize the loan structure.

Besides implementing various policies issued by the central bank and the China Banking Regulatory Commission, commercial banks will also work out more detailed rules on housing loans in accordance with local conditions. The banks will focus on control both of quantity and loan structure, as well as risks in a rational way.

For example, Huaxia Bank said that it would be strict in loan issuing standards and in examining and approving loans.

Many banks have already slowed down the growth of lending.

The recent housing price drop in southern Chinese cities such as Shenzhen and Guangzhou coupled with the government’s policy on tightening control over the market has made more people have a wait-and-see attitude.
Source: Insurance Newsnet

China’s developers are still building ‘energy-guzzling’ buildings, flying in the face of sustainability pledges made during their design.

China, facing an uphill battle to secure energy and resources to feed its booming economy, has set targets to make new buildings 50% more energy efficient by 2010.

But the China Daily reports that only 53% of China’s new buildings had met national energy conversation standards citing a construction ministry survey which, totally corectly, blamed cost-cutting developers.

Song Chunhua, president of the China Real Estate Association, said, ‘The findings are alarming. More comprehensive measures are needed to achieve the national goal.’

Song said developers had ‘changed their minds’ on implementing energy-saving standards and were ’still building new energy guzzlers.’

This is always, not only in China, an absolute given.

If you want energy-saving buildings you need strong government action. It has happened elsewhere. The booming construction industry is a huge drain on global energy stocks.

Construction and building materials consume 16-18% of China’s energy use, analysts have estimated, and around half of the world’s new buildings go up in China each year. (Our illustration is of a properly designed and properly constructed energy-saving building. It is in New York.)

The problem is that developers can turn a fast dollar by ignoring energy-saving buildings. The way, the only way, is immensely tough government action at every level. Unless that happens rowing affluence poses a threat to efficiency goals as the country’s rapidly expanding middle class clamors for larger, more energy-intensive housing. And, in the end, most of them will have to come down.
Source: Reuters

In a bid to control land use the government has banned urban Chinese from buying residential land or houses from farmers. An executive meeting of the State Council, China’s cabinet, warned that policies on rural land use will be strictly enforced.

State Councilors urged local governments to strengthen rural land management, improve the village and town planning and tighten control over the construction of farmers’ homes.

Farmers’ homes shall be built primarily on land that is idle or approved for housing and the policy that each rural household is allowed to have only one patch of housing land would be rigidly enforced.

Urban residents are forbidden from buying housing land or homes from farmers, and work units and individuals are prohibited from renting or occupying rural land for real estate development.

The meeting was presided over by Premier Wen Jiabao and State Councilors were ordered to see that government departments strictly examine land use plans and rein in sprawling urban projects.

China is facing a sharp conflict between land supply and demand, and the area of arable land, which had shrunk by 4.6 million mu from the end of last year to 1.827 billion mu, was only slightly above the minimum of 1.8 billion mu (120 million hectares) set by the government.

State Councilors said the government needed to set up the most stringent land management system, take strong moves against land waste and promote land saving and better planning.
Source: China.org.cn