Loopholes for foreigners buying Shanghai property

When a decade-long restriction on foreigners making property purchases in the Chinese mainland ended last month, expats across the country rejoiced. But for non-mainlanders in Shanghai, the news was nothing to pop the cork over. Despite being home to one-fourth of China's foreign population, Shanghai upheld its restrictions against selling its golden real estate to outsiders.



China's contentious attitude toward property-purchasing expats dates back a decade, when overseas investors began buying up properties across the country in response to the PRC's economic growth.



Noticing that valuable land was being sold off to wealthy Westerners, the government ruled in 2006 that only foreigners who had worked or studied for more than a year in China - in other words, expats who actually cared about the country - could have property.



This, however, did not stop foreign firms from sending in stooges to buy land on their behalf, so further provisions were added in 2011 limiting foreigners to owning just one piece of property in China.



With speculation subsiding as a result of these policies, China witnessed the largest property boom in its history, maybe even in the world. Commercial and residential real estate purchases soared throughout the decade, with a majority of the land being bought up by the country's own rising middle class.



Willing to finally give the country's ever-growing foreign population a stronger sense of inclusion in Chinese society, in August of this year the State Council agreed to loosen restrictions on foreign investment in the real estate sector as long as it meets "real needs," meaning non-speculative.



Except in Shanghai, where 173,000 foreigners continue to be literally locked out of the most valuable land in all of Asia. Shanghai issued its first restrictions on property purchasing back in 2011, which stated that non-Shanghai hukou (household registration) families, including foreigners, have to provide proof of income tax or social insurance to the local government.



But most foreign employees here don't have social insurances, and just because one is working in Shanghai doesn't mean their company is contributing to taxation; many firms are actually registered with the Beijing Municipal Bureau of Local Taxation. And don't overlook exclusionary keywords in the provisions, namely "families," legalese designed to keep away single foreigners no matter how long they might have worked here or how much taxes they have paid.



But all is not hopeless. At the posh Lianyang community in Pudong New Area, where up to 20 percent of residents are foreigners, Home Link real estate agent Li Guanqiu told the Global Times that foreigners who are new to Shanghai can easily purchase property.



"The only document that they have to provide is a one-year job contract with a local employer, which is easy to fake," winked the man, who further explained that if a potential foreign buyer has the cash and does not require a bank loan, the entire transaction process takes only a few days, whereas it usually takes two months for Chinese.



"Local restrictions exist, but only on paper," Li said. According to him, 40 percent of Lianyang's foreign residents actually own their apartments. In the nearby Biyun community, another popular residential area for upper-class expats, property agent Wu Xiaoling echoed what Li had said.



"The only so-called restriction on foreigners purchasing a property in Shanghai is that they need to have a one-year job contract," she explained, adding that foreign families cannot access any mortgages for the second property they purchase here - they have to pay in full and upfront.



This may all seem like a startling revelation for those foreigners who blindly trust in official policy statements. But for those long-term expats who know how China really works, it is just business as usual.



For a city whose infrastructure and economy were built by an international community, not letting a foreigner have a home seems xenophobic. Why shouldn't foreigners who contribute to Shanghai be able to own their own home here?



That said, as history has shown, the tide can turn any moment against China's foreign populous. Even if you are wealthy or clever enough to skirt the laws of the land, be prepared to face the music should any legal violations be reported to the authorities. Your 6 million yuan ($942,359) Pudong apartment will be seized quicker than you can say zaijian!

