The Shanghai municipal government has further restricted foreign
investors from acquiring land for property development.
Under the No. 16 land transfer bulletin issued by Shanghai
Municipal Housing, Land and Resource Administration Bureau on
December 23, deposits on land for residential use and commercial
purposes can now only be paid in renminbi.
Previously, the bureau accepted four different foreign
currencies - US dollars, HK dollars, Euros and Yen - as deposits at
government auctions.
The move is widely seen as the latest attempt to clamp down on
excessive speculation in the nation's hottest property market.
Despite subtle changes, they are expected to have a large impact
on the new inflow of foreign capital, partly triggered by the
expectation of further appreciation of the renminbi.
Land for industrial use, however, can still be purchased through
foreign currency accounts, according to the No. 17 bulletin
released simultaneously.
Industrial experts and analysts said this subtle policy change
was expected to make a significant impact on Shanghai's property
market by containing the rush of foreign capital, which had been
partially blamed for pushing up prices beyond sustainable
levels.
James Macdonald, a senior manager of Savills Property Services
Co in Shanghai, told China Daily: "This (move) of course
will limit the capability for new investors coming into China's
market to acquire land for development. But it should not have too
big an impact on some of the large foreign property developers who
have been operating in China for years."
These developers, he said, would have already accumulated large
cash reserves in renminbi from previous profits.
"They have been in China for a long time and should have really
large stockpiles of renminbi through revenue generation from the
existing properties," he said.
A spokesperson for the municipal administration bureau said the
department had no further comment on the circular.
"This stricter restriction on property development by foreign
investors is expected to be an effective measure to stabilize
housing prices in Shanghai," said Wang Shujuan, an analyst on
property at Orient Securities.
Shuai Hu, an analyst on property at Haitong Securities, said
that the supply and demand imbalance would remain the major factor
in determining future property price movements. The stricter
restriction is expected to ease pressure on prices in residential
houses, he said.
"The impact of the rule change needs to be watched closely,"
Shuai said.
(China Daily December 27, 2007)