Making Property Investment Simpler for Non-Residents

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.
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.