As property markets fall world-wide, one of the few consolations for
real-estate investors is that some governments have become more open
to nonresident property owners. A growing number of them are considering
loosening or temporarily suspending foreign property-ownership restrictions
in a bid to stimulate their real-estate markets. In January, for example,
Beijing issued a one-year suspension of a one-year residency requirement
for foreign nationals buying a house. The Cayman Islands and Australia
have also recently loosened their rules. Meanwhile, the issue is being
discussed in numerous other countries, including the Philippines. Loosening
foreign-investment restrictions isn't new. Governments have been attempting
to stimulate foreign investment for years in response to swelling interest
from international investors. In 2005, India began letting foreigners
invest directly in Indian residential and commercial real-estate development.
And in late 2006, the government lifted a required 10-year lock-in period
on repatriating property sale proceeds, although it's limited to $1
million a year.
Slumping property sales has given the issue renewed urgency, as countries
strive to find ways to stimulate local economies. Last month, the historically
foreign-investment-friendly government of the Cayman Islands temporarily
lowered rates on their real-estate transfer "stamp duty" taxes,
including a reduction to 5% from 7.5% on waterfront property. At the
same time, the country's real-estate brokers group, Cayman Islands Real
Estate Brokers Association, announced a 20% rebate on commissions. The
discounts last through Sept. 30. Restrictions on foreign ownership exist
mainly in emerging property markets. Most Western European countries,
including the U.K., France and Italy, don't restrict foreign nationals
from owning real estate. (Notable exceptions are Switzerland and Austria,
which have established some foreign-buyer quotas to keep prices down
in some ski towns.) The U.S. doesn't restrict foreigners from buying
property.
Ways to restrict foreign investment aside from outright bans include
high transfer taxes and limits on when and how much money investors
can repatriate. Rules can differ depending whether the purchase is a
residence or an investment. To be sure, not all countries are choosing
to loosen regulations. Some may crack down on foreign investment, blaming
it for driving prices to unsustainable levels, says Danny Bance, managing
partner of U.K.-based International Property Investment Network, a research
and investment services provider for investors. But many governments
believe that foreign investment spurs infrastructure development, which
spurs economic opportunity, says Mr. Johnson, 59 years old, of Detroit,
who got his start developing luxury property in Michigan, including
a large Lake Michigan resort. He says he helped convince the British
Virgin Islands government to loosen curbs on foreign investment partly
through his willingness to hire local residents for senior management
positions.
