Foreigners are now limited to buying one home for personal use in Shenzhen. The rule, which came into effect Wednesday, states that all non-mainlanders, including overseas nationals, Chinese citizens resident overseas and residents of Hong Kong, Macau and Taiwan, will be allowed to buy property only if they sign a guarantee that the house is their own property in Shenzhen and is for personal use.

According to the South China Morning Post, the rules will only affect new buyers. Non-mainland homeowners who already have more than one property in Shenzhen are grandfathered in and will be allowed to keep them.

According to experts the paper interviewed, the new regulations – the city government’s first real measures to limit foreign investment – are unlikely to have a serious impact on Shenzhen’s real estate sector.

“Only 8 percent of property in Shenzhen is bought by non-mainland residents, and around 20 percent of these buyers have two or more houses in the city,” Mr. [Andy] Lee [Yiu-chi, general manager of Centaline China's Shenzhen branch].

City governments all over China have been trying to cool a red hot real estate sector to apparent negligible effect, as major cities including Shanghai, Shenzhen, Beijing and Guangzhou reported rabid growth in the first six months of this year. The average price for new properties in Shenzhen climbed 40 percent in the first half of 2007, with an average price per square meter in June at RMB14,500 according to China Daily.

Vague property regulations and limited government intervention has sparked rampant speculation by domestic property developers, pushing demand through the roof. The new rules limiting foreigners into the market in Shenzhen won’t change this.

Dezan Shira & Associates maintains an office in Shenzhen, advising foreign investors on legal administration, corporate establishment, due diligence and tax policy in the city. Please contact Alberto Vettoretti or visit the Shenzhen office website for more information.