Shanghai has started to curb property acquisition by overseas companies as part of its efforts to cool off prices in the real estate market, a senior government official said yesterday.
Overseas invested companies will face stricter controls if they wish to acquire fully completed real estate projects, according to Liu Jinping, vice chairman of Shanghai Foreign Economic Relations & Trade Commission.
"We no longer encourage foreign companies to purchase en-bloc properties rather than develop their own," said Liu.
"Stricter requirements are applied to the approval of such acquisition deals to prevent prices from being pushed up by speculative investors."
Contracted foreign investment amounted to US$8.07 billion in the first seven months, down 6.58 percent from a year earlier, led by a 40-percent slump in property spending, according to the commission. That followed a 5.4-percent increase last year.
Acquisition deals between domestic and overseas companies were valued at 8.64 billion yuan (US$1.14 billion) during 2006, up 43.56 percent from 2005. Among all sectors, real estate had 4.37 billion yuan of purchase transactions, making up almost half of the total amount during the period.
Major cross-border deals in the property market last year included an office building in downtown Jing'an District purchased by Morgan Stanley for 1.96 billion yuan. Gateway Capital, an investor from the Middle East, bought a tower of 100 units in Xintiandi's Lakeville Regency from Shui On Land for about 600 million yuan. Germany's SEB fund bought the Platinum tower near Xintiandi for about US$250 million from Macquarie Global Property Advisors.
Property service providers said the weight of money looking for investment in Shanghai property remains high amid low vacancy rates, high rents and expectations for stronger demand, despite tighter controls on overseas investment.
A total of 10 en-bloc acquisitions were secured by overseas investors in the city in the first half of this year as residential and office properties stayed popular, according to an industry report by Colliers International. The figure compared to 19 transactions in the whole of last year.
Since May last year, the central government has unveiled a string of new policies to restrict overseas real estate investment and soothe pressure on surging property prices. New rules require overseas institutional investors with total investment of more than US$10 million to have at least half of the money as registered capital in a mainland-incorporated enterprise.