China's property market has witnessed remarkable growth in recent years, with much of the local wealth stemming from real estate. While the media often focuses on Chinese property buyers in foreign markets, there are also foreigners who choose to purchase property in China for personal reasons. In this comprehensive guide, we'll explore how foreigners can navigate the process of buying property in China.
Can foreigners buy property in China?
China is known for having strict regulations on foreign property ownership. As a foreigner, you are allowed to purchase one unit, but you must have studied or worked in China for at least one year. Additional requirements may apply in cities such as Beijing and Shanghai. Unlike in some other countries, you have the option to buy property directly from developers, individual sellers, or agents. However, it's important to note that the property must be for personal use, and renting it out is not permitted.
Buying Land in China
Foreigners are not permitted to buy land in mainland China or Hong Kong. Instead, you can lease land for a period of up to 70 years. Urban land in China is collectively owned by the people and administered by the state. To lease land, you need to sign a land grant contract with the land administration department in the county where you intend to lease.
The Process when Buying Property
To help you understand the buying process, we've outlined the key steps involved:
Find a real estate agent
While not legally required, it is highly recommended to hire a local real estate agent who is well-versed in local regulations and the market. You can find agents through online platforms or personal contacts. When selecting an agent, ensure they have a proven track record of assisting foreign buyers.
Submitting an offer and paying the deposit
Once you've found a property that meets your requirements, it's time to prepare your offer. If the seller accepts your offer, you will typically need to pay a deposit of around 1% of the purchase value to secure the unit.
Sales & Purchasing Agreement (SPA)
The next step is to draft and sign a Sales & Purchasing Agreement (SPA). This agreement outlines crucial details such as the selling price, payment terms, and conditions. After signing the SPA, you will be required to pay approximately 20-30% of the purchase price, which will also need to be notarized.
Register the contract at your local police station
To ensure the legality of your purchase, it is essential to register a copy of the contract with your local police station. This process can be facilitated by a Mandarin speaker, such as your real estate agent.
Signing a new contract with a government official
To finalize the purchase, you'll need to register the property at a government level. This involves signing a new contract witnessed by a government official.
Transferring the title deed
The title deed transfer is the final step in the process. It is crucial to conduct a diligent check of the title to ensure no hidden mortgages or encumbrances exist. The transfer typically takes place at the Deed and Title Transferring Office, which is one of the property exchange centers in the city where you're purchasing.
Receiving the contract number
Your agent will submit the contract online, and you will receive a contract number as proof of the property transaction. Ensure you obtain a bonafide certificate of ownership for your records.
China Real Estate Websites
China's real estate market is vast, and numerous listing websites have emerged over the years. Some popular options include:
- www.sofang.com
- www.fang.com
- www.zillow.com
- www.sothebysrealty.com
For Chinese buyers looking for overseas properties, Juwai is a prominent platform catering to their needs. Additionally, your real estate agent can assist in finding properties that align with your preferences.
China Property Prices
Property prices in China, especially in major cities like Shanghai, Shenzhen, and Beijing, have experienced significant surges in recent years. The increasing urbanization trend, alongside generous housing loans, has contributed to soaring housing prices. The Chinese market's preference for real estate investments has also played a role. To combat these skyrocketing prices, the government has implemented cooling measures, such as restrictions on the number of properties one can buy and higher down payment requirements.
It's worth considering investing in smaller cities or areas with upcoming infrastructure developments, as they offer more reasonable prices and growth potential. However, personal circumstances and investment goals should guide your decision.
Property Taxes & Fees
Here are the essential taxes and fees you need to be aware of when buying or selling property in China:
Transfer tax
The transfer tax ranges from 3% to 5% and depends on the property's location and the real estate agent's commission.
Stamp duty
Stamp duty is relatively low at 0.05%. However, the transfer tax may still account for a larger proportion of the total costs.
Real estate commissions
Real estate agents typically charge commissions ranging from 1% to 3% based on the property value.
Land use tax
If you are leasing land, you will need to pay an annual land use tax, which varies between RMB 1.5 and RMB 30 per square meter in Shanghai.
Capital gains tax
If you sell a property within five years of owning it, you may be subject to a capital gains tax of 5%.
Property tax
Currently, property tax is not levied in most parts of China, except for select pilot projects in Shanghai and Chongqing. Rates and regulations relating to property tax can vary, so it's important to consult your agent for the most up-to-date information.
Can foreigners inherit property in China?
Foreigners can inherit property in China, and the process has become more streamlined. Instead of undergoing an inheritance right notarization, heirs now only need to prepare the necessary inheritance documents and present them to the local real estate authority. If you require assistance with the inheritance process, hiring a local property solicitor can be beneficial.
Conclusion
China's real estate market presents both challenges and opportunities for foreigners looking to purchase property. While prices have soared in recent years, attracting foreign investors remains a popular choice. Remember to navigate the strict regulations, pay attention to taxes and fees, and partner with a credible local agent throughout the process. By understanding the basics and working with the right professionals, buying property in China can be a rewarding experience.