Foreigners will be restricted from buying property to cool down overseas investment in real estate, the government announced yesterday.

According to a package of new rules, foreigners need to be resident in China for at least a year before they can buy homes to live in; and need to secure government approval to buy property they don't intend to live in or use.

The residency restriction does not apply to overseas Chinese or compatriots from Hong Kong, Macao or Taiwan who can buy houses for their own use.

For overseas real-estate developers, the ratio of registered capital should be more than 50 per cent of any project that surpasses US$10 million.

The Ministry of Construction, the Ministry of Commerce, the National Development and Reform Commission and the People's Bank of China said the rules are part of  government efforts to regulate the real estate market and to improve the efficiency of foreign investment.

"Governments at various levels should realize the potential problems relating to excessive overseas investment in real-estate development," said the statement.

The number of newly-established foreign-invested real-estate firms increased by 25.4 per cent in the first half of this year, compared with the same period last year. The amount of foreign capital actually used in the sector was up 27.9 per cent.

The number of new construction projects jumped by 22.2 per cent in the first half of the year, fuelling a 11.3 per cent rise in economic growth in the second quarter, the highest rate in a decade.

The government has tried to rein in the property sector by raising interest rates, tightening lending rules and imposing strict controls on land use but apparently with little effect.

According to a recent report by DTZ Debenhan Tie Leung, a London-based property consultant, overseas investors bought US$4.5 billion worth of property in the first quarter, nearly a third more than the whole of last year. Beijing and Shanghai are reported to account for more than 80 per cent of overseas purchases.

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