Cities across China are expected to implement more stringent residential real estate regulations following an August 2011 announcement from China’s Ministry of Housing and Urban-Rural Development (Ministry of Housing) calling on cities in various categories to adopt tighter requirements.

On August 17, 2011, the Ministry of Housing released a notice "encouraging" cities that meet two or more of the following criteria to implement new requirements with respect to the purchase and/or financing of residential real estate: (i) cities that rank high in the China price index for newly constructed residential real estate; (ii) cities that have experienced a significant increase in the purchase price for newly constructed residential real estate; (iii) cities that have experienced a significant increase in the transaction volume of newly constructed residential real estate; (iv) cities in close proximity to major cities that have already implemented restrictive real estate regulations where the percentage of speculative or non-owner occupied residential purchases is relatively high; and/or (v) cities that have witnessed a high level of public dissension in connection with high residential property prices and/or the local government’s loose implementation of real estate regulations.

Based on the above criteria, market experts predict that more than 30 second-tier and third-tier cities will implement new regulations on residential property in the near future.

Shanghai and Beijing are among Chinese cities that have already tightened regulations with respect to the purchase of residential real estate. The regulations included, among other things, a property tax on residential properties and a quota on new home purchases. Since Shanghai introduced the measures in January 2011, real estate prices and transaction volumes for residential properties appear to have steadied, and variations of the initiatives have now made their way to more than 40 cities throughout the country.

The following is a list of cities that have implemented the regulations (as of September 2011):

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