Realestock Blog

The Chinese real estate sector could be in for a big shakeup soon. Many pundits are predicting that the government is getting ready to introduce a property tax. 

While most people in the world regard property taxes as a way of life, in officially Communist China there’s no government taxes on the books for private property ownership because originally there was no private property ownership at all. However, things have changed dramatically in recent years - market demand and rampant speculation have fueled a huge real estate industry, and have helped push the Chinese economy into overdrive – annual growth is over 8% a year (as opposed to the 2 or 3 percent that more established economies grow at during boom year).  

So why introduce a property tax then when it could weaken one of China’s strongest economic sectors? According the Financial Time’s Geoff Dyer, there are a lot of good reasons to get the Chinese middle class acquainted with tax:

A property tax is the favored policy tool of many a reform-minded economist. It would help reduce the rampant speculation in the real estate sector by introducing a cost for holding empty property. And it would help develop a reliable source of income for cash-strapped local governments - one of the key long-term policy challenges for Beijing.

While any property tax rolled out would likely be very minimal at first, “a small annual levy on second or third homes in the luxury sector”, there are still fears that is could prompt a massive sell off and scare away speculators – one of the key factors in the ever increasing property prices.  

In April, Beijing rolled out a series of much needed measures to cool overheated home prices, and since then, speculation that a real tax is coming has intensified. "There are several plans on the table. While we don't know which one will be chosen, it is more likely to be implemented by New Year's Day," a market source said in an interview with the Hong Kong Standard. "Such a move does not require National People's Congress approval, only the State Council's, so the time frame is shorter."

Meanwhile, commercial real estate in China remains strong, even with high vacancy rates.  The Wall street journal has reported that China’s insurance regulator has just amended the rules that govern how insurance corporations invest their assets. Chinese insurance companies are now allowed to invest up to 10% of their assets into commercial real estate – a move which could introduce as much as 460 billion yuan ($68.5 billion USD) of potential demand into the commercial real estate market.

Sources: 

Does Beijing's Clampdown on Property Still have Force? - Geoff Dyer, The Financial Times

Property Tax Revisions Loom as Prices Continue to Spiral - Beth Ye, The Hong Kong Standard

Insurers are Likely to Boost China Property Demand - Aaron Back, The Wall Street Journal 

Picture:

Lensfodder, Flickr

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It's another monumental week in the real estate world. Once again, Taking 'stock supplies you with some interesting tidbits to keep you up to date on various world developments (no pun intended). If you read anything in the news that you think should be in next week’s blog, feel free to comment on the posting. Alternatively, if you want to comment on any of the stories listed here, let us know what you think!

Luxury Real Estate News/Views

Neighbor says Golf is a Sport Too Close (New York Times)

A lot of people want to be near to their favourite golf course...but how near is too near? A resident whose house is next to the 6th hole (a par 3) at the Winged Foot Golf Club is sick of golf balls hitting his property, breaking his windows, scaring his children, and making his dog sick. The hole is currently closed due to a restraining order brought against the club. You know it has to be serious when Donald Trump is offering to mediate.

It's not Easy Being Green - If You are Buying a Luxury Home...

This week's Realestock blog entry looks at how many luxury buyers are not concerned about their homes being environmentally sound. However, some developments are managing to combine good living with good style.

America's Luxury Homes, Downsized (Forbes)

On a similar theme, Forbes.com has written this interesting article about how many popular luxury properties are smaller than traditional 'luxury' housing. This is partially due to the lack of space, growth of environmentalism, worries about reselling the property in this less than buoyant market, and, more importantly, because it isn't 1987, and big doesn't necessarily mean classy. After all, is it better to have Foie Gras, or a Big Mac?

Worldwide Property News/Views

China's Homeowners Feeling Little Pain (Newsweek)

Here in North America, we are all on tenterhooks, fearful to hear what will happen to the property market next. However, in China, people are not feeling the pinch as we are. According to Newsweek, the cost of an average home has increased fourfold in the past eight years, and China's 80-million strong middle class are clambering to get on to the property ladder. Whether the market will eventually deteriorate like ours is still uncertain, but for the moment, things are looking sunny for the Chinese market.

Have I Got the Candidate For You! How the Real-Estate Market Could Turn Florida for Obama (Slate.com)

We are all now acutely aware how politics can affect house prices. However, in Florida, the real estate market could affect the choice of candidate. Voters are looking at which candidate will save them from getting into negative equity. This choice could be crucial as to who becomes the next president: because as Al Gore knows, Florida can change an election.

Rise in Property Re-structuring, Recovery and Debt Business Expected (PropertyWire.com)

According to PropertyWire.com, many international real estate groups are moving into the restructuring and recovery business - due to the large amount of real estate developments and projects that are falling through due to a lack of funding, in addition to the large amount of foreclosures and other loan difficulties that are occurring.

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Once again, it's been another week of changes, trials and tribulations. Here's a round up of some interesting luxury, North American and World stories that were in the news this and last week. If you read anything in the news that you think should be in next week's blog, feel free to comment on the posting. And I hope our readers in Canada had a lovely Thanksgiving!

Luxury Real Estate News

Athens extends its Luxury Scope (International Herald Tribune) In the last few years, the luxury products market in Greece has increased a great deal, which has inspired a range of luxury building opportunities, including a high retail mall

Concierge Auctions Pleased With Results of Luxury Real Estate Auction (PR-Canada.com) Our partner, Concierge Auctions, have completed a successful Auction in Florida. With the state of the current market, auction houses are finding more properties available for sale at both ends of the market.

Gulf's, Indian real estate markets to be among best: Survey (India Times) Looks like the luxury market in India, China and the Middle East is still growing, and will outperform all other areas of the world. So that second home in Dubai could be an excellent investment....

General Real Estate News

Buying a condo, one piece at a time (The Real Deal) One innovative way of allowing people without a down payment to get a home is a rent-to-buy scheme, which is currently being tried in Brooklyn, New York. Tenants pay an expensive monthly rent, but do not need to put any money down, so it is a way of saving for your new home, while living in it.

Escape...to the City? This week's Realestock Blog Post: Many people are choosing to leave their lives in Suburbia and move back to the city...with their kids and pets in tow. Is this a good move? It is worth giving up land and space to be closer to your workplace and favorite coffee shop?

Former Muppet house sells for $28M (The Real Deal) When I first saw this headline, I assumed that it was about Kermit and Miss Piggy's old place. Unfortunately not....but a nice story nonetheless

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BEIJING, July 9, 2008 /Xinhua-PRNewswire via COMTEX/ -- Xinyuan Real Estate Co., Ltd., a fast-growing residential real estate developer with a focus on strategically selected Tier II cities in China, today announced that it has been selected as one of China's Top Fifty "Golden" Overseas-listed Chinese companies by CEO & CIO magazine, a prominent Chinese magazine focused on business management.

"We are delighted to be recognized among this elite group, including peers operating across many different industries in China," said Mr. Yong Zhang, Xinyuan's chairman and chief executive officer. "We believe that our disciplined focus on high asset turnover, efficient capital management and strict cost control helped us to be considered as a top overseas-listed Chinese company."

The publication narrowed its top fifty from a list of 537 medium-to-large China-based companies listed on major stock markets, including the Hong Kong Stock Exchange, NASDAQ, NYSE and the Singapore Exchange. The magazine noted that key selection criterion was based on robust revenue growth and high investment returns.

Xinyuan's compound annual growth rate of approximately 100 percent over the past three years was cited by the magazine as a key factor in Xinyuan's selection as one of China's Top Fifty "Golden" Overseas-listed Companies.

About Xinyuan Real Estate Co., Ltd.:

Xinyuan Real Estate Co., Ltd. is a fast-growing developer of large scale, quality residential real estate projects aimed at providing middle-income consumers with a comfortable and convenient community life. Xinyuan focuses on China's Tier II cities, characterized as larger, more developed urban areas with above average GDP and population growth rates. Ranked #1 among all property developers in Zhengzhou in terms of contracted sales of residential units for the years 2004, 2005 and 2006, Xinyuan has expanded its network to cover a total population of over 34.5 million people in six strategically selected Tier II cities, comprising Hefei, Jinan, Kunshan, Suzhou, Zhengzhou and Chengdu. Xinyuan has completed 14 projects with a total GFA of over 1.0 million square meters within the past 10 years and as of March 31, 2008, Xinyuan had 8 projects under construction with a total GFA of 1.2 million square meters and five additional projects under planning with total GFA of 1.2 million square meters. Xinyuan is the first real estate developer from China to be listed on the New York Stock Exchange. For more information, please visit http://www.xyre.com .

- Xinyuan Real Estate Co., Ltd.

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