08 | NEWS ANALYSIS WORDS | Adrian Bishop The World looks East


Last month saw a glut of news coming in from the Chinese property market – some of it positive, some of it negative, all of it important. Our OPP Connect editor Adrian Bishop takes a look at the stories from the Orient that caught his eye, as well as what’s been happening elsewhere in the real estate world...


NEWS


www.opp-connect.com | APRIL 2013


Xi Jinping has been confi rmed as China’s new head of state by the National People’s Congress meeting in Beijing. At the same time, Premier Wen Jiabao has stepped down after a decade in power to make way for new Chinese Prime Minister Li Keqiang. In his last move at the end of February, the outgoing leader made it clear that local governments should make it an annual objective to control home prices.


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The property sector rumour mill went into full swing with fears that the new leadership was about to impose tough market-cooling measures. The fi rst reaction reported in OPP Connect came from Sherman Lai Ming- kai, the chairman of Centaline Property Agency, who said more restrictions might be introduced if prices in major cities grew by 10% in the fi rst half of this year. He believed a rise of 10% a year would be acceptable. Tougher existing home purchase restrictions, reduced mortgage loan discounts for fi rst home purchases, or tightened lending for second purchases might all be possible, he believed. But, in any case, he expected nothing would happen until the second quarter when the 10-year urbanisation plan, including the role of real estate was fi nalised.


Meanwhile, the Bloomberg news website reported that the middle class had been driving up prices as they scrambled to buy and some developers had been reporting the doubling or tripling of sales. Then, the State Council announced in


arch has been a landmark month for the Chinese nation and for its property sector.


an online notice that capital gains tax on mainland China sales should be levied at up to 20% – a rate fi rst announced in 1994 but never strictly enforced – rather than the 1-2% that was often being imposed in practice.


That caused frantic sellers to pack estate agencies in Beijing, Shanghai, Nanjing, Wuhan and other cities, hoping to register their sales with government agencies before the tax became effective, as no timetable was initially announced for its introduction. Some luxury home owners even cut prices by up to 10% to entice buyers. To cope with the demand agencies opened four hours later until 9pm and agents queued overnight to help clients complete their transactions by transferring the property title or ownership to the sellers. The number of residential transactions in the secondary market registered with the real estate exchange centre in Beijing saw business doubled and later tripled.


Zhang Dawei, research director at Centaline China, explained, “On a normal working day the numbers are only fi ve to six hundred and only a few on a Sunday. Now we expect queues outside the centre will persist for the whole of this week.”


The price rise fears were illustrated by a report by Centaline showing resale house prices in Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu and Tianjin all saw month-on-month increases of over 1%. The highest rise came in Beijing, up 3.04% on the month, pushing the annual increase to 22.19%.


But not everyone agreed with the cooling measures. He Qi, vice


chairman of the China Property Society in Beijing, commented, “The market always over-reacts when new rules are announced because of uncertainties and misinterpretation.” Standard & Poor’s credit analyst Bei Fu had a similar reaction, “We don’t see the new policy will have a particularly huge impact on the industry. It targets speculators, but the market recovery


“Li Keqiang made it clear that local governments should control home prices”


since last year is driven by self-user demand.” Ting Lu, chief China economist at


Bank of America-Merrill Lynch, was reported as saying the 20% capital gains tax could be waived or reduced through collection loopholes.


But some married couples were taking their own action to avoid higher Capital Gains Tax – by splitting up! The number of couples divorcing at Shanghai’s Zhabei District marriage registration centre hit a record high of 53 couples on a single day. Many used inexpensive ‘quickie’ divorces to break up, so they could divide split property ownership and avoid having to pay CGT when selling their home. One Australian agency, Raine & Horne, even got excited with the hope that property investors in China would divert their capital into homes Down Under. CEO Angus Raine says, “The upshot is that cashed up Chinese nationals


could look to foreign property markets, which will surely mean more money fl owing into Australian real estate in capital cities such as Sydney.” In Europe, there was mixed news about property prices. Since values in Madrid, Spain, have fallen to more than 50% of their peak before the market crash, some analysts were saying they may well have reached the bottom of the market.


Germany and UK were tipped as


good places to buy commercial property – although sterling was dubbed the worst performing currency by Marc Morley-Freer, Head of Private Client Business at Smart Currency Exchange – and even commercial property values in Italy were rated as being Warm in the Fair Value Index ™ from DTZ. More good news came in a report from CBRE, which suggested that European property investors were more positive about the future. Perhaps the mood in Turkey was a little gloomier, where the focus was on the impact of the rise in KDV (VAT) to an 18% maximum on new build properties and how much might be absorbed.


Following the death of President Chavez, there were also a few stories about Venezuelan overseas property investors, indicating that they were keen buyers of both luxury residential and commercial units.


One prime development showing sky-high interest from investors from all around the world was The Address Residence Sky View in Dubai, where developer Emaar Properties closed registration after less than an hour due to record online interest from investors in more than 75 countries.


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