The Duke of Westminster’s property developer is gearing up for a $1 billion Chinese property fund. Note that the duke owns much of central London and a few years back asked for a special act of Parliament exempting his estate from death duties so that it could retain its appalling inequalities for generations to come. He was told to go away.

Now Grosvenor, the Duke of Westminster’s property developer and fund manager, has bought a pair of luxury housing blocks in Shanghai as it gears up for a $1 billion Chinese property fund.

Grosvenor paid about $80 million for the two towers in the Lakeville Regency, part of 91-acre Tai Ping Qiao development complete with lake and park.

Grosvenor, which manages £11 billion of assets world-wide, only made its first investment in China this April, buying a 12 storey- building with 105 units in the wealthy Gubai area of Shanghai.

Nick Loup, managing director of Grosvenor’s Asia-Pacific business said, ‘We are planning a significant business in China over the long term . . . we would expect Lakeville Regency to remain a key part of our portfolio for many years to come. We may never sell this ever.’
Source: The Times

There will probably be more restraining policies on the property sector over the next few months as the government tries to to rein in the real estate sector which is spiraling somewhat out of control.

Zhu Zhongyi, secretary-general of the China Real Estate Association, said soaring property prices raise the possibility that further cooling measures could be on the horizon.

Zhu Zhongyi said, ‘The government may launch measures targeting some key cities if property markets there get out of control. Or it could release uniform policies covering the entire country.’

According to the National Development and Reform Commission (NDRC), property prices in China’s 70 large- and medium-sized cities climbed by 7.1% year-on-year in June. And that is the highest it has been since last year.

Real estate investment jumped by 28.5% year-on-year, topping RMB988.7 billion in the first six months.

Zhu Zhongyi said, ‘Given the accelerating growth in prices, the government’s attitude on restraining foreign investment in the property market shows no signs of loosening in the next half-year.’ He added that although foreign investors are not the major driving force in increasing property prices, their overall impact cannot be overlooked.

With strong capital backing, foreign investors usually offer higher prices when bidding for land, potentially boosting property prices around the region.

According to Yang Hongxu, an expert with E-house China R&D Institute, there may be stronger policies in the pipeline. He said foreign acquisition of entire buildings might be prohibited or more restrictive measures may put on foreign-funded development of high-end properties.

A contrarian view was presented by Pan Shiyi, chairman of SOHO China, a Beijing-based property developer who said, ‘A less-developed pre-owned house market, curbed by too much taxation on transactions, is the crux of the imbalanced market.’On the other hand Liu Futan, ex-director of the macro-economy institute of the NDRC, called for the levy of a property tax as soon as possible.

Liu said, ‘As a tax levied on the ownership of property, it helps to reduce speculative investment into the real estate market.’ Indeed, there seems to be no consensus of opinion as to what action should be taken.
Source: China Daily

According to a report by the National Development and Reform Commission property prices in 70 major mainland cities increased an average 7.1% year-on-year last month, compared with a 6.4% rise in May.But an economist said price rises will ease (Note carefully there is no suggestion they will stop) in the second half.

Liao Qun, chief economist and strategist of China banking at CITIC Ka Wah Bank, said property sales in the three months ended May accelerated to 30% year on year, from less than 20% in the previous three months.

Liao Qun said, ‘Acceleration in prices is still under way in major cities. Prices in Shenzhen and Beijing were up 14.25 and 9.6% year on year, respectively, in May.’

He said this is mainly due to the ‘wealth effect’ arising from the stock market boom. He said, ‘The stock market boom in China is expected to be a long- standing factor underpinning the property sector in the years ahead.’

The government introduced tightening measures in 2004 to curb excessive real estate investment, rising sales and prices.

Liao Qun said the recent move by the China Banking Regulatory Commission urging commercial banks to limit loan growth to no more than 15% a year will have a greater impact on the real estate market than the increase in interest rates.

He said the new round of monetary moves was mainly aimed at stabilizing the rapidly expanding economy, not to rein in the property market. But, he expects property price increases in the 70 major cities will slow to 5.3% in the second half. Which, no matter how it is argued, is still an astounding price spiral.
Source: The Standard

Long Yongtu, China’s former top WTO negotiator, at ‘Dialogue-China’ forum in Nanjing, capital of Jiangsu Province, is reported in the Oriental Morning Post as saying real estate prices are too high in China and property developers should be levied heavier taxes.

Long Yongtu said, ‘The current real estate prices are so high and the people cannot afford it.’ He explained the major reason for the high prices is because supply fell short of the rising demand.

The government should adopt strict measures on vacant housing. Higher taxes should be imposed on vacant housing which is idle for a certain period of time.
Besides necessary macro-control measures, the key method to resolve the problem of high housing prices is to change people’s ideas that they must buy commercial housing.

Long Yongtu said most Chinese people need to solve their housing problem by leasing for a long time. Which may well be true but he did not explain how you change the engrained habits of a nation.
Source: China Daily

China’s State Administration of Taxation says that the total revenue from deed taxes has reached over RMB36 billion in the first four months of the year. Although turnover in the real estate sector in many areas has dropped, the income has jumped 32% from a year earlier.

Deed Tax is normally based on the price in case of sale/purchase of houses or sale or ‘right to use’ of State-owned land. Or through an assessment made by tax collection offices in reference to the market price of land, ‘right to use’ sale, sale of houses and in case of transferring land, ‘right to use’ of a house or a house as a gift.

Deed Tax adopts a flat rate within the range of 3%-5%. The rate applicable at a provincial level is determined within that range by the government at the provincial level.

Data shows that 32 provinces, municipalities and autonomous regions have seen their deed tax revenues spike up this year. However, the property markets in most of these areas are rather quiet. In Beijing, the turnover of completed apartments dropped 50% in the first quarter, while sales of properties under construction fell nearly 30%.

This seems odd but is caused by a difference in timing.

Lian Qifeng, official of State Administration of Taxation said: ‘Tax payment is usually later than the trading itself. Many buyers do not pay the tax until they get the property title certificates. So the tax income actually reflects the turnover of the previous period.’

Experts appear to agree deed tax income is not a good indicator of the overall health of the real estate market.
Source: CCTV