Local home buyers in Taiwan’s inflated real estate market are upset with the Chinese for skirting rules aimed at limiting the purchase of property in the island nation by people from the mainland, according to a Reuters report. Taiwan is also worried about Beijing’s growing influence in the country, which China views as a break-away province.

Property markets in cities around the world like Sydney, London and Vancouver have been boosted by Chinese investment, but capital flow from the mainland into the self-ruled island is a sensitive issue for many Taiwanese, and the government in Taipei has been criticized for not curtailing investments by mainland Chinese in Taiwan's real estate. Next month, the governments in Beijing and Taipei are set to review a trade deal that hundreds of Taiwanese students protested against in March, according to the Reuters report.  

Taiwan and mainland China have had a rocky relationship defined by bouts of aggression, rapprochement and snubs since 1949 when Chinese nationalists under Chiang Kai-shek fled to the island of Taiwan after losing a civil war to Communists led by Mao Zedong. Since then, China has repeatedly tried to claim authority over Taiwan, which it regards as a break-away island province, leading many Taiwanese to view dealings with the mainland -- especially those involving Chinese acquisition of assets in Taiwan -- with caution.

Shih Ming-shih, an official at Taiwan's interior ministry, said that the government would impose measures to limit Chinese from buying too many homes in Taiwan, because if it did not do so, it "would jeopardize our national security or economic development."

Many mainlanders usually buy homes through Taiwanese business partners or use overseas investment programs as a cover for their real-estate purchases.

“If people do not apply legally, there is no way we can stop that, but they have to bear the risk of losing the properties they bought,” Shih said, according to Reuters.

Taiwan has imposed strict rules on Chinese property buyers, including restrictions on quick re-sales and by excluding buyers with links to the Communist Party or the People’s Liberation Army. However, real estate agents said that loopholes allow mainlanders to skirt the restrictions, making it difficult for Taiwan to take any meaningful action. 

Only 400 apartments in Taiwan can be sold each year to mainland Chinese, but it is clear a lot more capital from the mainland is flowing in, according to the Reuters report. Since 2002, when Taiwan allowed mainland Chinese to invest capital in local real estate, 160 properties valued at $76.60 million have been sold to mainlanders. However, many industry watchers and agents reportedly say that the numbers are under-reported.

"Transactions under the table would be at least 10 times more than what we see on the table," a Taipei-based real estate attorney told Reuters.

“It's impossible for the Taiwan government to fix it. The best it can do is to set up a limit on how many houses Chinese can buy each year," said Stanley Su of Sinyi Realty Co in Taipei, adding: "That way, it can at least avoid a situation where massive inflows of Chinese investment go to Taiwan's property market.”

Taipei's real estate market, fed by money from mainland China, has shot up almost 200 percent in the last decade, according to property agents, making it difficult for Taiwanese to own homes in their own country. 

“If mainlanders are in the market we don't even have a chance. What if, in the end, those who live in Taiwan aren't Taiwanese but Chinese?” said Melissa Hu, a 40-year-old public servant in Taipei.

Hotels and retail shops in popular tourist areas of Taiwan too are hot picks for mainlanders as more Chinese tourists are allowed into Taiwan.

“Many Chinese clients are longing for Taiwan,” said Kidd Lin, a sales manager at Vantone International Development. “Taiwan offers a lifestyle that Chinese middle class are most looking forward to.” 

Beijing Vantone Real Estate Co., Ltd,  (SHA:600246), one of the first developers from the mainland to enter Taiwan’s market in 2011, has reportedly built a complex of high-end apartments valued between $99,000 to $3.3 million, just 30 minutes from the centre of Taipei and targeted at Chinese mainlanders. 

According to industry watchers, sales of such apartments to mainlanders will be subject to strict government scrutiny, as lawmakers have an eye on local elections.

“It's sensitive timing. We want to stay low-key,” Lana Xie, founder of a Beijing-based real estate agency that targets mainland Chinese buyers for Taiwanese residential property, told Reuters.

Sales reportedly doubled in the first half of this year with many Chinese buyers wanting “holiday homes” in southern Taiwan, Xie said, adding: “It's really not easy for Chinese to buy a property in Taiwan. That's why owning a Taiwan house is really something Chinese can show off to everyone.”