Why Meddling In The Market Is Dangerous

Here we may have the reason why so many Chinese investors are  buying up big overseas.

It also shows how counter productive attempts are when controls and taxes are used. They usually produce the exact opposite of what may be intended.

Those pressing for a capital gains tax or other market controls should take note.


As Taxes Take Hold, China Housing Market Witnesses Mad Shopping Spree

Home sales value and volume jump in China as buyers worry about government intervention.
China’s housing sales are like a new iPhone release every day.

The total value of new homes sold in China in the first quarter jumped a whopping 69% from last year, nearly all of it due to home buyers rushing to close on a property before more local governments follow in Beijing and Shanghai’s footsteps to introduce new transaction taxes.  Both cities mandated a 20% tax on home sales last month. Other cities from Nanjing to Guangzhou are reportedly considering doing the same thing to curb the hottest real estate market in Asia.

Sales of new homes, excluding government-subsidized affordable housing, totaled 1.2 trillion yuan ($194 billion) nationwide from January to March 31, the National Bureau of Statistics (NBS) said on Monday.

Volume sales were just as impressive as increasing prices.  Unit home sales rose 41% in the first quarter, NBS said today to a total of 189 million square meters of new properties sold.

The Chinese are the world’s quintessential real estate investors, mostly due to an absence of other investment products in the country. Investing in housing projects rose 21% year on year to 901.3 billion yuan, NBS said

The market is closely watching China’s housing bubble.  While it may not be anything close to the securitized and debt-burdened housing market of the U.S. and Europe, China is struggling to curb rapidly rising home prices.  As it is now, cities like Shanghai are fast becoming world class, whereas some middle class and all of the old Chinese working class are priced out.

Beijing actually banned people from buying two homes in the same city effective this month. High down payments — at least 20% for first time buyers and much more for second home buyers — have not been able to cool housing prices which have risen by around 2% month over month in most major cities, according to NBS data.

Rising wages and a lack of other investment opportunities have Chinese and even wealthier Taiwanese and Hong Kong investors snatching up prime real estate in tier one cities.

Last year, Hong Kong housing values rose more than anywhere else in the world. I’m dying to find out if there are actual bidding wars going on over there like we had here in the U.S. from 2002-2006. One day you make an offer for $400k, the next day three people raised the roof to $420k. (Now they’re living in rental property half the size of their Barbie dream house or underwater somewhere on the outskirts of Fort Lauderdale.)


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