JUNE 2011 |
www.opp.org.uk
NEWS Cracks in China’s price wall By Amit Katwala
CHINA’s residential property prices have remained resilient despite government measures because of loopholes, according to a report from ratings agency Fitch Ratings. The Chinese Residential Real Estate Q
and A highlights measures employed by the government, and the reasons they are failing. For example, the central bank cut lending limits for mortgages, but this has not had as much as an effect as it should have because many buyers are cash buyers. According to the report, Fitch estimates “that this proportion of cash payment is in the region of 30% to 50% of new-build purchasers.” Another mortgage condition that has
been introduced is the banning of fi nancing on second and third properties, but, according to Fitch, “families may arrange their purchase to evade this restriction, through extended family members or artifi cial divorce.” Developers have also been hit with
curbing measures – banks can’t lend to developers for the purchase of land, so they can only borrow to construct. However, according to Fitch, “developers can still raise equity, domestic bonds or offshore funds. Discipline on the lender side may be more patchy for smaller, rural banks where local governments
INDUSTRY | 11
NEWS IN BRIEF Brits look closer to home
AUSTRALIA is losing interest from overseas buyers, according to Rightmove’s Overseas search fi gures. There was a 14% drop in web searches for Australian property among people in the UK in April, the third month of decline in a row. Interest is instead switching to Europe, according to Rightmove, with rising demand for properties in the struggling Eurozone economies of Italy (up 7%), Greece (up 5%) and Spain (up 3%) ... possibly because of people looking for bargain buys from the so-called PIGS. The Spanish city of Valencia was the biggest benefi ciary of this interest, with a 69% increase in searches.
may be more infl uential.” Tax on homes sold soon after purchase have failed because the returns are such that a 5% tax is not enough of a deterrent. Fitch’s report says: “Tax rates in this bracket are not a major deterrent for those looking to long-term appreciations, or if short-term appreciation expectations are above 15%.” Fitch Ratings says the overall effect of
these measures has been to drive people away from major metropolitan areas towards China’s interior, and the demand has simply been exported. OPP recently reported on the rising home values in the interior of mainland China. During February, the price of a new home in the central city of Yueyang jumped by 12% year-on-year according to fi gures from the Chinese National Statistics Bureau. “Strict property measures in major
cities have driven buyers to smaller cities,” says Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd. “That raised infl ation pressure in those cities.” One measure that has been effective thus
far is residency limits. For example, to buy a property in Beijing it is necessary to show fi ve years of tax returns. Fitch’s report says this is “extremely effective in the near-term, driving sales volumes down signifi cantly.” Prices were up 7.7% year-on-year
in November in China’s 70 cities, according to fi gures from the National Bureau of Statistics. The housing market in China looks set to grow, as the country continues with its economic expansion. The World Bank’s predictions, which were released this week, forecast 8.5% growth in China this year.
AUAN loses Spanish court case
SPANISH illegal homes pressure group AUAN lost its case against the Minister of Public Works and Planning of the Junta de Andalucia, Josefi na Cruz last month The Criminal Division of the Superior
Court of Justice based in Granada ruled that the minister’s comments on the plight of the homeowners did not constitute a crime. AUAN was furious when Cruz said
in parliament on March 9 2011 that “the intrusion of people ... who are not of this country, and who have settled here illegally” was down to “a lack of respect for the culture of the territory, for the culture of the landscape and the culture of planning.” The senior politician went on to say that she
objected to “residents who have settled in good faith or not in good faith, and who are now demanding the we solve a problem that they are responsible for having created”. And, she told local newspaper
Costa Almeria News, “my comments mean exactly what they say. Foreigners who have built illegal houses in Andalusia have shown no respect for us. I find it incredible that one seeks to defend people who have committed illegal acts.” Now that the Supreme Court has
ruled that Cruz did not denigrate a group of people for being British, which would be a crime, it has given no leave to appeal against this decision. AUAN’s Maura Hillen still
regards the politician’s comments as “reprehensible … and we have no doubt that this will be taken into account in the polls.” Given the official approval of the courts to such an attitude, Hillen is mystified by the way in which the Spanish government is now embarking on an international charm offensive to persuade a new generation of overseas property buyers to invest in the country. “One should not ask more people to come here to settle,” she says. “The government authorities need to decide if they are going to treat their customers well or treat them badly … a business that treated its clients this way would be on the way to bankruptcy.”
Social housing in Africa A Rand 40 million social housing
project in South Africa’s Limpopo province that is turning former hostels into low-cost residential units could be used as a template for converting approximately 2,000 public hostels into new homes, Human Settlements Minister Tokyo Sexwale announced last month. And the authorities are considering outsourcing future contracts. The Seshego Community Residential Units social housing project is “the fi rst of its kind in this province”, Sexwale said at the offi cial launch of the project at Seshego outside Polokwane. To qualify as a resident in such a project, applicants should not earn more than Rand 3,500 a month, with rentals ranging from Rand 400 for a one-bedroom unit to Rand 800 for a two-bedroom unit. Half of the 189 Seshego units are already complete, with occupation due to start once all units are complete.
Student demand booms
The demand for student housing in the UK is booming and the sector has become the “best-performing UK property investment sector,” says a new report out this week from global agency Knight Frank. Student accommodation in all of the UK the regions (England and Wales) outperformed all other property asset classes in the year to December 2010, with total returns (income and capital values) of 14.65%, against London’s 8.41%. James Pullan, Knight Frank’s head of student property, told OPP: “With a record number of applicants students will once again fi nd there is an under-supply of student accommodation to meet their needs. The student accommodation sector is now recognised as forming a critical component of a balanced investment portfolio.”
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