Published on 23 May 2006 at 12:23 pm
Filed in Property News for China » China Property Latest
The latest news from the China property market is causing confusion among international property investors and overall things are not looking too favourable for property investors hoping to tap into the current short term capital appreciation potential from residential real estate in the main cities in China.
On the one hand the attraction of property in China as an income and profit generating commodity seems obvious when you learn that in the first quarter of this year prices soared by over twenty five per cent in certain districts of Shenzhen for example, with similar rises experienced in many of China’s main cities – but on the other hand the latest announcement from the State Administration of Taxation in China is that they are looking at drastic measures to cool the property market which they believe is overheated. So this means that the future success of China property as an investment commodity for an international investor is far from assured.
The fact of the matter is that it is incredibly difficult for an investor to time an entry into the property market in China correctly because market movements can be quite dramatic as can the Chinese government’s reactions to them.
For example, currently there appears to be great potential to tap into short term gains in cities like Shenzhen and Shanghai where property prices have been rising dramatically - a recent survey by the Ministry of Construction reveals property price gains in excess of 10% in April in three of China’s main cities. But at the same time the government is complaining that these price increases have been fuelled by constructors who are mainly concentrating on the high end market and causing a deficit of low cost housing for Chinese citizens. As a reaction to this the government is considering forcing certain localities to instead concentrate on developing lower cost housing and adjusting credit policy to force constructors to do their bidding.
In addition to this, the property profit tax that was introduced last year by the Chinese authorities in a bid to slow down the house price boom may be extended. Currently the tax is applied to those who attempt to resell China property for profit within two years of having purchased; if this taxation is extended it further reduces the appeal of investing in property in China for capital appreciation purposes.
Property investors looking for an income stream from investment property in China probably have the best chance of realising their ambitions as there exists potential in both the commercial and residential real estate markets for investors to purchase stock for letting and leasing. There is currently a deficit in the amount of available and affordable residential property in China’s main cities as well as a growing demand for grade ‘A’ commercial property in many of China’s main cities so an investor keen on the Chinese real estate market could consider targeting these angles for an income stream.
