China
Read our property and real estate news and updates on the property market in China including major cities like Shanghai and also Hong Kong. Information on where the Chinese real estate market is heading in comparison with the rest of the world. Reports and statistical information on property for sale in China whether it is residential or commercial property.

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China’s property market has taken a steep turn for the worse if we are to believe the various reports that are beginning to surface in major online publications right now.

The signs of trouble are not a total shock to the system of any alert investor, as many would have been aware of the implications when China started to ban major development projects at the beginning of this year due to heavy pollution in the city of Beijing. This ban didn’t happen overnight though, it was advertised in due time to give developers ample time to prepare themselves for the change.

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The term BRIC originated back in 2003 and was coined by Goldman Sachs economist Jim O’Neill. It was O’Neill’s opinion that since the US economy took a nose dive it allowed the BRIC countries Brazil, Russia, India and China to take a bigger slice of the world’s gross domestic product.

We would be taking a quick peek into the property markets of these four countries, to gain a better overview of what exactly is going on.

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office_buildings_in_shanghai_china.jpgThe fourth quarter of 2007 saw the end of Beijing and Shanghai’s housing boom. As transaction volumes plummeted by as much as 25 and 40 percent from July to August 2008 and by 67 and 70 percent year on year in Beijing and Shanghai respectively, developers’ are having to offer buyers’ massive discounts to boost sales of new units. According to CCTV, last month’s (August), average daily turnover in Beijing was a meagre 150 units which in Beijing standards is a new all time low.

Secondhand properties are also not doing well with a year-on-year decline of 10-15 percent in August, sellers have having to make price cuts by as much as 5 percent.

The situation at the moment is that it is a buyers’ market in housing in 1st tier Chinese cities with more and more potential buyers waiting to see if there would be further price drops to pick up properties at bargain prices.

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The Iconic Bird’s Nest Stadium in Beijing

Beijing’s property market has been ogled by investors for some time now. In the rush to build new infrastructure to compensate for the millions of visitors to the Olympic Games, many bought into the boom in the hopes of making a nice profit. But when China’s real estate market started to heat up a few years ago, Beijing tightened the rules. Suddenly it wasn’t as easy for foreigners to buy property anymore, especially if they lived overseas. While the new rule makes it a little harder for foreigners to invest in Chinese property, it isn’t all doom and gloom. Although a lot has been said and written about the Chinese property market, many investors are disheartened by the confusion of information in the market.

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After several years of unchecked growth, Chinese developers have run into the global credit crunch. Combined with a desire by the Chinese authorities to slow things down a little, shares in many of China’s largest listed property developers have fallen more than 50 per cent from their highs of last year in the face of investor fears that some developers might be forced into bankruptcy. The authorities have taken unusually strong measures to limit credit growth and have promised to introduce a tough new policy to reduce developers’ holdings of un built land.

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Shanghai’s real estate market is anticipated to slow down drastically in 2008, becoming more vulnerable to government policy shifts and attract less investment. This is according to several of the larger real estate analysts.

According to a Jones Lang LaSalle report released recently, after the government implemented the land appreciation tax and imposed additional restrictions on foreign investment in the sector, real estate investment saw a slowdown in the fourth quarter of 2007 and there was only one sizable sale completed in the city.

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The Japanese company, Sumitomo Forestry, is aiming to quadruple their sales of houses in China, hoping to achieve sales of around £4 billion by the end of 2009. The Sumitomo Forestry Company has a minority share holding in Paragon Wood Products (30%), a company that builds wood framed houses. At the moment, Sumitomo build very few units, but are planning on building 100 units a year.

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Rampant inflation; shaky, low interest no-deposit loans; 400 per cent stock market growth in 2 years; property values rising nearly 18 per cent over last year’s values.

Sound familiar? Followed by a tightening of lending restrictions, interest rate increases, 30-40 percent vacancy rates in new developments. Sound even more familiar? This is not the US market, this is China, which seems hell bent on following in the footsteps of the recent US sub prime crash.

The Chinese government is pulling out all the stops to prevent the same thing happening there. Interest rates have been increased five times in the last year and reserve requirements for commercial lenders increased eight-fold. The central planning agency imposed a price freeze on household essentials like cooking oil, electricity and water, in an effort to reduce inflation below 6 per cent. Securities regulators in more than one province have issued new rules banning high school and college students from buying shares to rein in speculative stock market investments.

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The authorities in the People’s Republic of China (namely the central bank and the Ministry of Commerce embarked on another round of regulations for property investors in July, China Daily reports. The latest changes affect overseas borrowing for mainland China real estate projects with more exacting procedures for bringing foreign capital into the country for the purpose of incorporating a real estate concern. From the article it is not clear if this is the sum total of these property/foreign exchange controls. Inward investment by property investment companies with foreign shareholders that are already incorporated would be more difficult to control.

Writing in the South China Morning Post a week earlier, Cary Huang reported that the authorities are trying hard to stop ‘illegal’ funds flooding in and creating price pressures in the property and equity markets. Clearly there are plenty of investors who are betting that the yuan can only continue to rise against the dollar; that the Chinese currency is in the exact opposite position to that of sterling in the early nineties.

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While the continued upward path of the Shanghai stock market has featured regularly in the world’s media, the city’s real estate market has not received so much attention. Nevertheless, property in China’s largest city is undoubtedly part of the boom and the web of economic dilemmas facing the Chinese authorities.

The latest efforts to curb real estate speculation have resulted in the introduction of a 20% tax on second-hand property sales. One explanation given for the increase is the authorities’ desire to prevent a speculative bubble in real estate fuelled by profits from the stock market. Another, more plausible reason is that the lure of the stock market is so great that people are selling property in order to finance speculative investments. This tax hike should certainly be seen in the context of Prime Minister Wen Jiabao’s general efforts to decelerate the juggernaut of the Chinese economy.