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Buying Property in China as a Foreigner

by | Sep 24, 2020 | Greater China Practice, Real Estate

What You Should Know About Buying Property in China as a Foreigner

Can foreigners buy property in China? Yes. This article will explain how.

Interested in buying a property in China as a foreigner? If you’ve been living and working in China for a while, you’ve seen that the quality of housing is high and that the real estate market is booming. Why pay rent when you may be able to invest in purchasing your apartment or home? Looking to invest in a commercial property? Find out how to purchase real estate in China.

What are the Requirements to Purchase Property in China as a Foreigner?

A foreigner must have studied or worked in China for at least one year before purchasing property there. A foreigner can only own one property in China, and that property must be residential.

There are additional requirements by province and city. For example, in Beijing, you must pay taxes and social security for at least five years before you are permitted to buy a property.

What are the Restrictions on Buying a Property in China as a Foreigner?

  • The property must be residential
  • If the property is commercial, a foreigner must incorporate in China
  • You may own only one property
  • You must possess a long-term visa
  • You cannot be a landlord, as a foreigner
  • You must pay a 1% deposit and an initial 30% of the purchase price to the seller in RMB, if you are obtaining a mortgage

Steps to Buy Property in China as a Foreigner

Obtain Proof of Residency in China

First, you should get proof that you’ve resided in China for at least a year. You can obtain that proof from your local Municipal Bureau of Public Security.

Find a Property for Sale in China

Identify a property you would like to purchase. You can search for suitable properties on your own or hire a broker to search for you. We can also introduce you to English-speaking real estate brokers in China.

Make an Offer and Enter into a Preliminary Agreement

Make an offer to the seller. If the seller agrees, or you negotiate and come to an agreement, you will both sign a preliminary purchase agreement and you will pay one percent of the purchase price to the seller.

Sign an Official Sale Contract

You and the seller will sign an official sale contract, which must be notarized because you are a foreigner. The official contract will also need to be registered with the local registry.

Transfer Title to Your Name

Visit your local Deed and Title Transferring Office to transfer the title of the house to you in your Chinese name.

Financial Considerations When Buying a Property in China as a Foreigner

Just as in the U.S., different cities and regions have different housing markets. You will pay more per square foot in a desirable location than in a more remote suburb. Keep that in mind as you look for the housing you and your family need.

When you contemplate the purchase price you can afford, keep in mind that you must pay 3%-5% of the selling price for the deed tax, a transfer fee of 0.5%, the city maintenance and construction tax of 7%, 0.2%-0.4% in legal fees, and 0.01%-0.3% of notarization fee, totaling up to 11.6% of the purchase price. Be sure to factor that into your housing budget.

Also, you should note that not all banks in China are willing to provide mortgage loans to foreigners. Your choice may be limited and you may experience a higher interest rate. The maximum amount of loan that you can get will be calculated based on the personal income tax you pay in China, and banks normally will not consider your other incomes (such as your other incomes in the U.S.).

Risks to Consider When Investing in Property in China as a Foreigner

Owning property in China does not give you the legal right to live there, unlike the laws in Thailand or Malaysia.

The government owns the land on which your property sits. You lease it for 70 years (if it is zoned for residential use). This can be problematic for two reasons:

If you purchase an older home, the government has the power to purchase your home and tear it down for new construction. In this case, you may lose money on your investment. The newer your home is, the less likely it is that this will happen.
If you sell your property with only 40 years left on the lease, that will be reflected in a lower sales price.

Do not buy a property unless all mortgages taken out by the seller are paid off. Your attorney will help you check the original deed to make sure there are no outstanding liens.

If You Have Questions About Buying Property in China, Contact YK Law Today.
We keep current with housing trends and local rules and restrictions in China and can help you purchase property in China as a foreigner. Call us to discuss your plans to purchase real estate in China.

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