A hot year for real estate

The China real estate market continued to experience rising values in 2010, fueled, in part, by the PRC government's expansionary monetary policies dating to the adoption of stimulus measures to counteract the effects of the Global Financial Crisis. In 2010, the government adopted a number of measures to cool down the real estate market generally and to curb the rise in housing prices in particular. Real estate developers' pre-sale proceeds are now required to be placed in escrow and can no longer be used to fund land acquisition. Buyers are prohibited from acquiring additional residential property solely for investment purposes. Banks have been directed to raise required down payments and interest rates for certain residential purchasers, as well as to deny mortgages for third homes.

There have been ongoing rumours about the impending imposition of real property taxes which are now included in the Government's 12th Five Year Plan as a policy measure to be reviewed and implemented over time. The principles of 2006's Circular 171 governing foreign investment in real estate have been reiterated with an emphasis on measures designed to make enforcement of these rules easier. Offshore transactions are now specifically subject to Chinese tax filing requirements and may, potentially, be assessed onshore capital gains taxes.