Buying a place to live is never easy. Even in one's home country, where the market and the local culture are familiar, it can often be a stressful process. For the foreign resident interested in buying a house in China, it can seem all the more daunting: Not only do many foreigners lack the local know-how, but there is also the language barrier to worry about. The fact that many foreigners come to China on contracts of less than five years makes any investment in property by necessity a relatively short one (and a company-owned flat or town house all the more attractive). Should an aspiring home-owner enter the unfamiliar Chinese market in the short term?

"If you're going to stay for three to five years, you should buy a property. Because if you don't, you will definitely regret it when you leave," says Hingyin Lee, director of research at consultancy Colliers International in Shanghai. In Shanghai and Beijing, the capital value of residential property is rising at the respectable rate of between 5 and 10 percent a year. In more rapidly developing cities such as Chengdu and Chongqing, it is even higher. If this trend carries on for a few more years, it means that it is possible to make a healthy return on an investment while avoiding the necessary evil of paying rent.

Rules are rules

Simply put, foreign nationals buying real estate in China are not granted the same rights as Chinese citizens. Regulations released in July 2006 aimed at clamping down on speculation from Hong Kong- and Taiwan-based investors limit foreign residents to buying a single property for "self-use" - and only after they have already lived in China for a full year.

Foreign speculators might have left the market, but that may have little to do with the 2006 rules. When Scott Barrack, manager of Shanghai-based property company Space, began working in real estate a few years ago, he found that 80 percent of foreign buyers were primarily investors, and only 20 percent were buying a place to live in. Now, he believes that balance has reversed. "By the time the [regulations] had come into place, the prices had already started to push the really short-term investors out of the market.".

The rules may be clear in their formulation, but implementation is not standard across the country. Even in the same city there can be significant differences. "In Shanghai, every district requires something different, and you might not know until you get to the exchange house," says Millie Zhang, general manager of Shanghai property company Livingland. She says that while in Pudong it is necessary to demonstrate that you have lived in China for at least a year, across the river in Jing'an district all you need is a contract that shows that you will live there for at least a year.

Colliers' Lee says further regulations are a possibility. "New measures, if any, will only act to dampen market sentiment. The government doesn't want to do too much. It doesn't want a crash - it wants a market that grows steadily."

The focus now is on Chinese speculators, and it is making it harder to buy a second property. Last September the down payment needed to get a mortgage on a second home was increased, and so too was the interest rate. Since then, says Lee the market has turned quiet as buyers have become more cautious.

Finding home

The actual process of finding somewhere to live can be gruelling. There are, however, some simple steps that can make it easier, and a lot less risky.

Space's Barrack recommends looking at as many properties as possible. This might seem an obvious rule when buying property anywhere in the world, but it is especially true in China because there are no standard prices. A fair number of sellers simply are not familiar with the market and might ask for a low price. But if you find a bargain, be careful when negotiating. "Don't think that the seller will sell the property just because you've reached their asking price. If you reach that price too quickly, then they will definitely raise it," said Barrack.

Both Barrack and Zhang stress the importance of uniqueness. "Buy a property that has something that makes it stand out - a good location, good management, or even a view," says Zhang. The main advantage of a unique abode is that it is harder to bargain the price down because there is no cheaper, identical property on the same block.

A house with a history, such as a hutong home in Beijing or a 1920s French Concession house in Shanghai, offers that bit of difference. But it can be more difficult to get financing when buying this kind of property. The standard down payment on a property is normally 30 percent. With high-end property this can be as much as 50 percent. The reason for this is that banks are wary of owners overvaluing their property in order to fraudulently acquire a level of finance over the standard 70 percent. For this reason, banks have become cautious when making valuations on high-end properties. When valuing, the banks look at the market as a whole. "They don't understand how two flats in the same building might have radically different prices," says Barrack.

Zhang urges caution when buying straight from a developer. "I don't recommend buying from a developer if the building is not completely finished. You have to start straight away, even though you can't use the property, and although the property might be all planned out in black and white, you don't know what you're going to get in the end."

The most important thing to look for is the management team. Bad management in a development can make a property look old beyond its years, damaging the resale value. Therefore it is worth looking into the developer's history to find one with a good track record.

For foreigners buying property in an unfamiliar market, a reliable agent is essential, as they have much more responsibility than an agent in the West. There are no independent escrow services or alternative payment processes. Furthermore, agents in China do not need a licence to set up shop. "The problem is not that they are going to cheat you, it's just that they might not be fully up to date with all the regulations and taxes," says Zhang. So for anyone considering snapping up a property in China, the first stage will not be checking up on developers or properties, but finding an agent that you can rely on.