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Property switch loophole blocked

Property switch loophole blocked

Write: Acario [2011-05-30]

Govt targets commercial spaces converted into residential homes

Property switch loophole blocked

Property developers will be banned from converting new commercial spaces into residential apartments, a major target for speculators looking to get around the price cooling measures.

According to a new regulation issued by five Beijing authorities, developers will be required to stick "strictly" to the approved blueprints for new construction projects.

The rules, which come into force on June 1, also state that stores and official buildings should be designed with public washrooms to prevent them from being used as residential apartments.

It is the third time this year the municipal government has released policies to strengthen supervision on the non-residential property market, with the latest being the most rigid, say industry insiders.

"It will plug a hole in the market," said Guo Yi, marketing director at Yahao Real Estate Agency. "Commercial projects will not get presale certificates if their owners want to sell them as residential dwellings."

Following the initial property market measures announced in February this year, when buyers were limited to a maximum of two homes, developers found a way around them by promoting commercial properties converted into homes, which are not included in the cooling measures. These projects largely include loft apartments.

However, the land use rights for these properties last at least 20 years less than a usual home, while power and water fees are more expensive.

"Yet, such projects are popular on the market due to their comparatively low prices," said Guo. "They have met a large portion of the buyer demand."

Secondhand commercial properties converted into homes have accounted for one-third of Beijing's entire trade volume in the last two months, a huge rise on the period before the cooling measures, show statistics from B.A. Consulting and 5i5j, a real estate service group.

Despite the move to plug this loophole in the policy, Chen Zhi, deputy secretary-general of the Beijing Real Estate Association, said relevant projects already given sales approval will not be affected. "The regulation targets projects still in the planning stage and applying for approval. The impact of the policy will be visible in at least six months," he said.

He added that the regulation will make the offending projects disappear and help authorities reach their goal of a "stablized" market price.

However, media reports suggest recent sales have remained robust.

"Some people think Beijing will have no new loft projects, which will push loft lovers to spend more on purchasing them," said Li Xiang, a real estate agent at Homelink in Chaoyang district.

Many owners also share the same belief. Jiang Meifeng, a 53-year-old Shaanxi native who bought a commercial-turned-residential apartment for her daughter last year, said she is not worried about the regulation.

"Most owners in our community purchased such homes to invest. As the housing price is so high now, a lot of first-time homebuyers will choose small apartments as they can afford the comparatively lower price," she said.