The last few months have brought a wave of new regulations regarding the purchase and ownership of real estate across China. Continuing a series of restrictions that first began to appear in April 2010, one of the chief motivations for the new legislation was to allow greater control of what was happening in the market, owing to governmental concerns that real estate purchases and prices were occurring that were not in the best interests of the national economy over the long-term. The result of some of these changes has been to discourage foreign investment in Chinese property, without necessarily doing very much to stimulate new investment.

One of the restrictions that went into effect in early 2011 had to do with the prices offered and paid for homes and other properties currently on the market in China. Using guidelines that relate to location, use of buildings situated on the property and other considerations, maximum prices were put into place that were discouraging for both potential buyers, as well as sellers, who found themselves with fewer prospective buyers. Thanks to price setting at national level, a number of investors have turned to property opportunities in the UK, Canada, the United States and other countries.

Along with the regulation of pricing for homes and other types of properties, the latest restrictions also placed limits on the number of properties that could be held by one owner, regardless of whether the owner was an individual, a domestic corporation or an international investor. This move also served to cool the interest of many who have considered Chinese real estate as an investment opportunity, hastening the exodus to buy available properties in other countries. Even Chinese nationals, who have for some time found buying investment properties abroad to be more lucrative than spending a great deal of money on real estate closer to home, have found their attention increasingly turning elsewhere.

Concern over the impact of real estate transactions began to emerge several years ago, as China entered into what was described alternately as a property boom and a property bubble. In order to slow the rapid increase in the volume of transactions within the property market, taxes were first imposed, followed by various types of restrictions on how banks could qualify lenders began to emerge. Supporters of the measures claim that doing so helped China to avoid many of the financial issues faced by other countries during the recent worldwide recession.

While Chinese Premier Wen Jaibao has stated that the restrictions will remain in place, since the economy of the nation is moving in the direction desired by the government, not everyone is happy with the recent round of restrictions. Many ministers support the restrictions, but others believe some modification should be made and other methods used to move the economy. Minister of Housing and Urban-Rural Development, Jiang Weixin, who was supportive of measures adopted in 2010, noted that efforts for change are underway and that some of the  “purchase restrictions would be scrapped after a platform offering property information was established.”