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Expectations of real estate market after the BIG TWO CONFERENCES

Expectations of real estate market after the BIG TWO CONFERENCES. Presented by: Alex D. ZHANG Date: 18 th March, 2010. What’s the BIG TWO CONFERENCES. National People's Congress (NPC) National Committee of the Chinese People's Political Consultative Conference (CPPCC)

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Expectations of real estate market after the BIG TWO CONFERENCES

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  1. Expectations of real estate market after the BIG TWO CONFERENCES Presented by: Alex D. ZHANG Date: 18th March, 2010

  2. 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

  3. 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.

  4. Market rules • 2009 Shanghai Housing supply increase : Housing trading • volume increase = 1 : 1.4 • Speculator’s paradise

  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

  6. 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

  7. 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)

  8. 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)

  9. Future expectation • Two markets: -- Low end government provided markets: limited price -- High end free markets: bubble keeps growing

  10. 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).

  11. Thank you

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