by Bill McBride on 4/25/2010 09:08:00 PM
Sunday, April 25, 2010
Hundreds of miles inland from the booming real estate markets of Beijing and Shanghai, an unlikely property fever is gripping this middling industrial outpost.And on speculators:
Taxi drivers boast of owning multiple flats for investment. Billboards hawk developments with names such as Villa Glorious and Rich Country. Frenzied crowds pack sales events with bags of cash, buying units that exist only on blueprints. Average home values in Hefei soared 50% last year.
"No one had any idea real estate would get this hot here," said Huang Qingyuan, a sales agent for one of Hefei's most expensive housing estates — they go for about $120,000 per apartment.
While pricey by local standards, that's still a fraction of what homes cost in the capital.
[In a building that is sold out, Guo Hongbing, a marketing consultant for several developers] was interested in estimating how many were left empty by investors. His unscientific method? Looking for curtains.A few key points:
"See, less than half that building is occupied," he said, pointing to one block with several bare windows. "These speculators want to buy as many possible."
Of course the rules could change. From Esther Fund at the WSJ: China Considers U.S.-Style Property Tax
China is considering introducing new or higher taxes on real estate, possibly even a U.S.-style property tax, which would mark a significant escalation of its struggle to cool down a booming property market now widely being described as a bubble.This is different than the loose credit driven bubble in the U.S. Per my friend Michael in China:
How authorities handle any kind of property tax—the prospect of which is fiercely opposed by some property developers—will have significant implications for China's economy ...
The majority of homes in China are purchased with down payments between 30-40%, which is required by the banks, and nearly 25% of homes are purchased with all cash. Only those qualifying for low-cost housing can purchase a home with a minimum down payment as low as 20%.If anything the lending is stricter now. But this property tax proposal (or something similar) could have a real impact.
Posted by Bill McBride on 4/25/2010 09:08:00 PM