Download Expectations of real estate market after the BIG TWO

Expectations of real estate market
after the
BIG TWO CONFERENCES
Presented by: Alex D. ZHANG
Date: 18th March, 2010
What’s the BIG TWO CONFERENCES
• National People's Congress (NPC)
• National Committee of the Chinese People's
Political Consultative Conference (CPPCC)
• A talk between local government and central
government; a talk between people and
government
Important issues: high housing cost
• How to prove it’s a problem?
-- 10% or 90% can’t buy the housing
• Bubble: Trade in high volumes at prices that
are considerably at variance with intrinsic
values.
• Intrinsic value: hard to define.
Market rules
• 2009 Shanghai Housing supply increase : Housing trading
volume increase = 1 : 1.4
• Speculator’s paradise
The Demand & Supply Curve
2.5
2
1.5
Price
Supply
Demand
1
Supply New
Demand New
0.5
0
0
0.5
1
1.5
2
Trading Volume
2.5
3
3.5
Bubble: yes Prick : no
• Big support of GDP
• Local government’s biggest income (income
from selling land = 50% of total income)
• If pricked: government, banks’ crisis
Strategy for 2010
• Maintain a steady environment of real estate
market. Slight increase or decrease.
• Increase low-end supply, decrease high-end
demand.
• Cool down speculation.
• Slow down the bubble forming or expanding
Detailed policies
• Increase low-end supply
-- government provided cheap housing for low
income people
(?)
• Decrease high-end demand
-- Higher mortgage interest for second
housing for a person
-- High tax against fast buy, fast sell
-- Property tax (1% equity value per year)
Most effective policies (if possible)
• Lower the selling price of land from the local
government
• Reduce the taxation on housing (12 taxes, 50
related fees, 62 charges for housing in total,
account for 40% - 50% of the price)
Future expectation
• Two markets:
-- Low end government provided markets:
limited price
-- High end free markets: bubble keeps
growing
Investment hints
• No worry about luxury housing (villas etc.) and
housing in competitive cities. (Shanghai,
Beijing etc.)
• Do not hold too many housing under the same
name.
• Sell low end housing (bad location, bad
environment).
Thank you