Is This a Good Time to Invest in China’s Residential Real Estate Market?
You probably would never have guessed it, but the women’s rights movement in China has a deep effect on real estate prices there. How come? Well, just like in other countries such as the USA and Israel, Chinese women are also rebelling against discriminatory marriage customs and, as part of their struggle, many of them choose to buy their own apartments instead of waiting for a husband to move in with.
This naturally adds to the tight real estate situation in the Sleeping Giant. But why is this happening now, and is this the time to set a foothold in the Chinese real estate market?
My name is Ofir Bar, an investor with about 25 years of experience in worldwide markets. I admit, for a long time I didn’t even consider entering China’s real estate market. That changed a while back, when I heard about the deep changes China is and was going through in recent years. As I see it, the case of China’s real estate market requires quite a lot of research. Why is this country going through these changes? Are there any restrictions on foreign investors? Is this real estate market even worth your effort? Let’s find out!
Yes she can
Traditionally, a Chinese man must purchase a residential asset in order to be considered suitable for marriage. Once the marriage takes place, the wife moves in with him. This means she is completely dependent on her husband, and isn’t able to stand up for her values if the marriage goes wrong — or else, her husband can just banish her, leaving her homeless. This tradition held for centuries, but now that Chinese society has gone through so many changes, many Chinese women are not willing to have this anymore.
A survey held in 2020 found that in a decade, the percentage of women who possess residential assets rose from 6.9% to 10.3%. Keep in mind that this data is even more substantial considering the fact that in this decade, the number of single Chinese women increased by about 10 million. Another study found that about 94% of Chinese people support women’s independence in this context.
This major mindset shift came simultaneously with the real estate crisis in China: Many entrepreneurs ran out of capital, causing them to abandon unfinished assets, scaring away potential buyers. As asset prices and mortgage interest plummeted, single women seized the opportunity to purchase small apartments by the masses. As a result, many real estate agents started marketing their assets as ‘single women-friendly’ apartments.
This might mean an opportunity for you, as a real estate investor. However, before you hurry to purchase residential property in China, you should remember that it’s not that easy. This market is quite unique, so there are a few things you need to take into account before diving in.
Regulations and limitations
Forgive me for being the party pooper, but the Chinese government restricts foreign ownership of local residential assets in many ways. Here are a few.
First and foremost, foreigners can own Chinese property on a leasehold basis only. The land on which the property is built is owned by the government, and you can only purchase the right to use it for a fixed period, often 50 to 70 years. Also, you need to obtain approval from the local government before purchasing it. This involves demonstrating a valid reason for investment, like residence or work in China. Once approved, you’ll need to register the property with the relevant authorities.
China has strict regulations on foreign currency transactions, so you’ll need to handle a lot of bureaucracy before you complete the purchasing process. Keep in mind that it’s essential that you follow the guidelines and procedures set by the State Administration of Foreign Exchange (SAFE), so as not to make things even harder for you. In addition, tax implications are also a thing to bring to mind. There’s a value-added tax (VAT) on property transactions and a potential income tax on rental income or capital gains. I’d advise you to seek counseling from tax professionals to understand your obligations.
It’s important that you remember that in China, real estate regulations can vary per region and city. It’s crucial to understand the specific rules and requirements of the area you’re interested in.
All the single ladies
No wonder China’s real estate agents are doing all they can to attract the constantly growing group of local single, independent women seeking their own residential real estate assets. But as for foreign investors, it’s still rather difficult to penetrate this market. So, for now, I think that this market may still be more suitable for experienced entrepreneurs.
