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Foreign hands could steady realty cradle

By Andrew Moody (China Daily)
Updated: 2009-03-04 08:03

The financial maelstrom sweeping across the globe has spared no one.

China, like other nations too has been caught up in the tsunami and is leaving no stones unturned to escape the onslaught. As part of this, the nation embarked on a series of measures aimed at boosting local spending. Prominent among these measures are the ones announced by the government to prop up the sagging real estate market.

The nation has recently relaxed the property norms for foreigners to spur demand and rein in prices that have fallen by nearly 0.9 percent in January over last year. The new rules allow foreigners to participate more actively in the real estate market as well as boost purchases of second homes and also boost rentals in prominent locations.

While it is still too early to judge the impact of the policy on the sector, China Daily traveled recently to the China World Trade Center (Guomao) area, Beijing's business district, to elicit views from expatriates about what they felt needed to be done for more investments.

Many like Lynne Olsson feel that they can take advantage of the policy relaxation. Though she has yet to buy a property in China, having moved to Beijing from Melbourne, Australia, with her husband David, a lawyer, a year ago, she is now contemplating purchase of a new home and also considering property as a viable investment.

"It is a possibility. Earlier, we could not think of it, but now we can," said Lynne. "We are actually going to be here for five years so buying property is certainly a consideration," she said.

But Olsson and other expatriates will have to buy a considerable number of properties to trigger a revival in the market.

Property companies throughout China are reportedly slashing prices by 20 to 30 percent, while others are dangling carrots like 'a job with a flat' for fresh purchases.

In 2006, the government had imposed restrictions on foreigners buying property and curbed their purchases to one dwelling and that too only after they had spent 12 months in the country. The nation had contemplated the move then to rein in the booming real estate market. At that time foreign buyers accounted for nearly 8 percent of all real estate transactions. The figure now is just 0.5 percent.

Joan Wang, head of research at real estate firm Savills Beijing feels that the new measure would do little to boost the overall dull trend in property prices. "Foreigners account for only a small proportion of the sales now. In addition, the property market is an unpredictable one, and as such foreign buyers may be cautious before testing the waters," she said.

Mikolay Baranov, 25, who works for a Russian oil company, is someone who shares this caution. "I am not too sure if I will buy right now, although I am allowed to do it. It is an uncertain time for the property market," he said.

Baranov is one of the fortunate few to have made a killing in the China property market. He bought an apartment in Hainan Island, off the south coast of China, last year and it has already doubled in value to $700,000.

He still considers property in China to be a good long-term investment and intends to make another purchase when the current uncertainty ends. "Why not? It is quite a good investment to buy property in China," he said.

Expatriates often zero in on apartments in a wide range of areas in Beijing. The one-bedroom apartments costing around 800,000 yuan in Dongcheng and the mid-level complexes at Jiaodaokou and Dongzhimen are the ones that appeal to the younger professionals most.

Apartments in Sanlitun and Chaoyang Park, ranging from 950,000 yuan for a one-bedroom to 5 million yuan for a three-bedroom apartment usually attract a more mature clientele. There are also those who would prefer to stay in the Southern Californian-style suburbia at Shunyi, near the airport, where townhouses cost anything between 6.6 million to 12.9 million yuan.

Many foreigners, however, are still not too sure on whether they should take the property plunge or not.

Christine Ellis from Montpelier in southern France is the head of an international legal firm based in Shanghai and has been in China for over four years now. She has no plans to buy a property here despite having the means.

"I am not interested in buying a property in China as I don't know how long I will stay and I would be a bit afraid as to what to do with the property once I leave," she said.

"Somebody has to care for it and if you don't speak the language and go back to Europe it would be too far away."

Apart from lifting restrictions for foreign buyers, a number of other measures have also been introduced to help revive the market.

Stamp-duty has been abolished for buyers and sellers, while value added tax for sellers has been removed. Similarly the urban property tax has been lowered for foreign buyers. The initial down payment amount has also been reduced to 20 percent from 30 percent.

More than anything else, it is the uncertain tenure of the postings that are making foreigners hesitant on property investments.

Emily Dupe, a trainee lawyer from London who works for an international firm of lawyers, has been in Beijing only five months.

She is staying at an apartment in China World paid for by her company but would be interested in buying property herself only if she was staying longer. "If I was here on a more permanent basis, then I would be interested," she said.

Others are unlikely to act, as they see no point in buying a property other than one main residence.

Michael Humphries, 50, a medical researcher from London, has been in Beijing for over five years and is happy with the apartment he owns.

"One (apartment) is enough and I won't consider buying another one for investment. I prefer to keep everything very simple."

Even those who made a killing in the past from the property market are now busy weighing their options.

Dmitry Strelnikov, 33, from Moscow has been in Beijing for 10 years and works for a cargo transportation company. He lives in a townhouse with his wife Natalia, 28, a housewife and their two children. They bought the property for 1.5 million yuan in 2004 and it has since doubled in value.

Dimity asserts that his future investment in the property market hinges on how long he intends to stay in Beijing. "Property here is certainly cheaper than in Moscow and so is the cost of living. But I also have to decide whether I will stay here for long," he said.

This raises the question on what do foreigners spend their money on in China, if they do not invest in property.

Ellis from France said she is a saver, rather than a spender, and manages to put aside 40 to 50 percent of her salary. "If I was in France or Germany, where I was before coming to China, I would only be able to save around 20 percent," she said.

Olsson, who moved from Australia, believes there is a new mood of realism among expatriates. "When something is in the news all the time, like the financial crisis, people tend to follow a trend. You feel as though you have to tighten your belts a little bit."

"I have just been to the China World Shopping Mall and some of the shops seem quite empty. I am not sure whether it is the time of the day or whether it is still winter but there doesn't seem as much activity as when we first moved here in the run up to the Olympics, " she said.

Others have other priorities, rather than contemplate property investments.

Natalya Moores, 29, a Ukrainian born American citizen, has been in Beijing with her husband, a theater producer and children's author, since August. They prefer to spend most of their money on private education for their three children - the fees for just one child running to something like 60,000 yuan a year.

"One of the reasons we came here was to get good education for our children. We also wanted to instill in them the Asian work ethic. I have never seen anyone here who is lazy. We also want our children to speak fluent Chinese," she said.

She does allow herself one indulgence. "I love my Apple and I buy a computer every six months," she said.

For British medical researcher Humphries, spending money on travel is much more satisfying than real estate. His journeys have taken him to Heilongjiang, Tibet, Inner Mongolia, Sichuan and Huangshan Mountain.

"I am fascinated by China, its culture and spend a lot of time traveling to other provinces. The number of places to see is inexhaustible. I have learnt enough Chinese to travel pretty well independently."

Trainee lawyer Dupe is impressed by the value for money of what she can buy in Beijing. "Everything is cheaper than back in the UK. I go to the Silk Market to pick up clothes and there are a lot of bargains. Western chains such as Mango or Zara have items which cost the same as in Britain," she said.

She does feel, however, the downturn is having an effect on some people's spending habits. "I know of a few people working for recruitment consultants who have lost their jobs and are not spending as much they did earlier," she said.

Ellis, on the other hand, said that most Westerners have a better standard of living than at home, despite the current economic pessimism. "Everyone says they are better off here than in Europe. I know people back in France are complaining very much about taxes and the quality of life," she said.