Picking a good investment property
June 22, 2010
Property investing has become a popular Australian pastime with one in ten taxpayers owning a negatively geared property. But just what makes a good bricks-and-mortar investment? It's not about buying any old house or unit, that's for sure, and it's most certainly not about buying something you'd want to live in or even in an area that you necessarily find desirable. Over the next few weeks I will investigate what factors to consider in an investment purchase.
The first biggie is what is better – good price growth, or a high rental return?
There's two ways to measure your return on investment. Capital growth – the change in price over time – and rental yield – how much rent you're getting as a proportion of what you paid for the place. Gross rental yield is your annual rent divided by the purchase price, or value, of the property.
Here's an example: If you bought a flat for $400,000 and you rent it out for $400 a week, you would calculate ($400 x 52) / $400,000. You then multiply that by 100 to get a percentage figure. In this case that gives you a gross rental yield of 5.2 per cent.
People often talk about buying a property with high rental returns. However, most of the professionals who buy property on behalf of investors would advise going for capital growth primarily, and then aiming for a decent yield. Their argument is that just like interest payments left untouched in a bank account, house price rises have a compounding effect when the market is going up. Rent payments on the other hand are generally used to service the costs of owning a property – that is they help to pay interest payments, rates and so forth, and they don't compound. A bit like if you had a bank account and kept withdrawing the interest payments, it might provide an income stream but you wouldn't get the benefits of growth on growth.
Generally people who favour high rental yields will be those investors who have less disposable income that they can use to pay the property's associated bills. They have to have a higher rent-earning property because that's how they can afford to own it in the first place. People who have more spare cash are more likely to be able to go for a property that has higher price-growth prospects but might attract lower rent.
As a rule of thumb, houses tend to grow in price faster than units. However, units tend to attract higher rent. So units can be cheaper to buy and hold, but may not earn you as much growth in the long run.
Likewise, country properties tend to have higher rental yields and lower capital growth than their city counterparts over time. So country properties can be less expensive to buy and hold, but may not earn you as much growth in the long run.
If you're in the market for an investment property, deciding what capital growth rate and what rental yield you will target will depend on your own financial situation.
Buyers agent Stuart Jones of Rose & Jones says when buying city investment apartments he targets 5 per cent gross yield and between 4 and 8 per cent capital growth, combining to give total target returns of between 9 and 13 per cent.
For city houses, Jones seeks gross yields of between 3.5 and 4 per cent.
Jones says it's important to target realistic returns. "People read stories about somebody who bought a property for $100,000 and then in two-and-a-half years' time it was worth $350,000," he says. "People chase that but what they don't realise is it comes off a low base ... there might have been something environmental that went on at the time, like a mine opened up around the corner and all of a sudden you know your place is worth more than you would realistically get in a normal market.
"It's not about finding bargains, it's about getting a good combination of yield and growth and allowing property to do what it does through the passage of ownership, and that is grow."
On a note sure to please tenants, Jones says smart investors need to look after their properties and keep them fresh. "If you take from property and don't give to it, like a relationship, it'll stop giving to you," he says.
Are you an investor? How did you pick where to buy? Do you prefer to invest in houses or units?
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Showing posts with label property. Show all posts
Showing posts with label property. Show all posts
Saturday 26 June 2010
Saturday 19 June 2010
Investors ignore signs and pile into property
Investors ignore signs and pile into property
Peter Martin
June 16, 2010 - 1:00AM
AUSTRALIANS are diving into negatively geared property even as the Reserve Bank signals that another interest rate rise could be only weeks away.
Figures from the Bureau of Statistics show that while lending to buy homes in which to live fell a seasonally adjusted 10 per cent in the first four months of the year, lending to property investors rose 11 per cent. In the past year lending to investors rose 30 per cent nationwide, and 20 per cent in NSW.
''These investors aren't concerned about interest rates,'' said a BIS Shrapnel analyst, Angie Zigomanis. ''They can see prices rising and real estate looks a safer bet than the stockmarket.''
While some of the new real estate investors were taking money out of the sharemarket, most were using funds they had been keeping on the sidelines.
''You've got people who have still got their jobs and have been fiscally conservative - and potentially money is burning a pocket,'' he said.
''If you stick money in a term deposit it faces tax. A lot of people are averse to putting it in the sharemarket, given how it's been going, and residential property has bottomed out and been climbing for 12 months. That's given people confidence to jump back in.''
Mr Zigomanis said a key factor for some would have been the government's decision not to move against negative gearing after the Henry tax review.
Tax Office figures show a record 1.2 million investors said they spent more money on their rental properties than they earned in 2007-08. One in every 10 taxpayers owned negatively geared property.
Reserve Bank figures released yesterday show that in other respects we are being more careful with our money. Credit card cash advances are down 5.5 per cent over the year and the proportion of those withdrawing cash from their bank's ATMs rather than another banks' has risen to a record 62 per cent.
The minutes of the Reserve's board meeting this month suggest it will leave rates on hold next month but consider lifting them in August in response to inflation figures to be released next month.
The minutes identify international developments and the outlook for inflation as the key drivers of rates and, unusually, nominate the next month's figures as the ones to watch.
The Reserve's deputy governor, Ric Battellino, told a conference he was unconcerned about household debt, noting that since 2006 it had stayed steady relative to disposable income.
Claims that house prices were high compared with income did not differentiate between city and regional salaries.
This story was found at:
http://www.watoday.com.au/business/investors-ignore-signs-and-pile-into-property-20100615-ydds.html
Peter Martin
June 16, 2010 - 1:00AM
AUSTRALIANS are diving into negatively geared property even as the Reserve Bank signals that another interest rate rise could be only weeks away.
Figures from the Bureau of Statistics show that while lending to buy homes in which to live fell a seasonally adjusted 10 per cent in the first four months of the year, lending to property investors rose 11 per cent. In the past year lending to investors rose 30 per cent nationwide, and 20 per cent in NSW.
''These investors aren't concerned about interest rates,'' said a BIS Shrapnel analyst, Angie Zigomanis. ''They can see prices rising and real estate looks a safer bet than the stockmarket.''
While some of the new real estate investors were taking money out of the sharemarket, most were using funds they had been keeping on the sidelines.
''You've got people who have still got their jobs and have been fiscally conservative - and potentially money is burning a pocket,'' he said.
''If you stick money in a term deposit it faces tax. A lot of people are averse to putting it in the sharemarket, given how it's been going, and residential property has bottomed out and been climbing for 12 months. That's given people confidence to jump back in.''
Mr Zigomanis said a key factor for some would have been the government's decision not to move against negative gearing after the Henry tax review.
Tax Office figures show a record 1.2 million investors said they spent more money on their rental properties than they earned in 2007-08. One in every 10 taxpayers owned negatively geared property.
Reserve Bank figures released yesterday show that in other respects we are being more careful with our money. Credit card cash advances are down 5.5 per cent over the year and the proportion of those withdrawing cash from their bank's ATMs rather than another banks' has risen to a record 62 per cent.
The minutes of the Reserve's board meeting this month suggest it will leave rates on hold next month but consider lifting them in August in response to inflation figures to be released next month.
The minutes identify international developments and the outlook for inflation as the key drivers of rates and, unusually, nominate the next month's figures as the ones to watch.
The Reserve's deputy governor, Ric Battellino, told a conference he was unconcerned about household debt, noting that since 2006 it had stayed steady relative to disposable income.
Claims that house prices were high compared with income did not differentiate between city and regional salaries.
This story was found at:
http://www.watoday.com.au/business/investors-ignore-signs-and-pile-into-property-20100615-ydds.html
Friday 18 June 2010
Academician turned property millionaire
By Sherry Koh | June 17, 2010
Academician turned property millionaire
The humble and funny man: Dr Peter Yee at his office-cum-training centre in Selayang.
Despite his unassuming and jokester demeanour, Yee, 53, is someone who stays strongly focused on his goals. He has compiled a long list of academic qualifications through the years and has also paid many “tuition fees” (errors in property investment) since he started investing in his late 30s.
His never-give-up attitude has led him towards the much-desired path of financial freedom. To him, there is no such thing as failure, just learning. He has started businesses and failed. But he never saw those experiences as a failure despite what some might have branded him. He continued acquiring non-academic knowledge and finally found his riches via property investment.
Today, he lives in his dream house with a panoramic view of Kuala Lumpur’s city centre. The dream home closely resembles a sketch of a house on a hill that he drew in year 2000 and stuck onto the door of his wardrobe.
His tenacity might remind people of Yoda’s (Jedi Master from the Star Wars universe created by George Lucas) worldwide-known gems of advice - Do or do not. There is no try. StarProperty.my visited Dr Peter Yee at his office in Selayang, played the 'Success' board game he created and chatted about his interesting journey towards financial freedom.
Tell us about your journey towards financial freedom.
I spent too much time studying. That was my mistake. I went to five different universities, including the ones in Japan and the USA. I bought my first bungalow in my late 30s. Before that, it was just “break-even” every day. Basic education is important. But if I were to get a degree and immediately focus on making money, the results would’ve been different. A lot of my new friends and neighbours are not highly educated, but they make a lot of money because they focus their time on making money. That’s why my third book’s topic has changed. It will be about making money.
You should never give up in life, regardless of your age. There’s no such thing as failure. I have started businesses and closed them down. People might say that I am a failure, but I don’t think so. Instead, I change. This is because some businesses were not be suitable for me.
You were a teacher and remisier before. Did those experiences have a major impact on your life?
In year 2002, I was a school teacher and was posted to Kuala Terengganu. I was bonded for seven years as I took the Government’s scholarship. I wanted to leave to do business but I couldn’t because I did not have the RM100,000 to return to the Government. At that time, I had a house in Kuala Lumpur. It was sometimes rented out, and sometimes my family and I stayed for a while. An important learning is to invest in properties near you, maybe within 30 minutes, especially for residential properties. It is easier for tenant management and property maintenance.
My second scholarship was to Japan to study computer algorithm. It was a four-year contract. I served two years and paid back half the sum, RM15,000. I came back (Kuala Lumpur) to do management training for a college. It wasn’t easy because I was sent outstation all over Malaysia. One week in Penang, one week in Kuantan and so on. I did not like that kind of life. So I resigned and started my own training company that is similar like now, but smaller. Universities don’t teach living skills, how to make money or how to live a better life.
I needed sales. Everyday my staff asks, “Boss, what to do.” [laughs]. Nine months after starting the business, I became very depressed because there were no sales. So I shut down the business and became a remisier. I sold off the only house I have and paid a deposit of RM50,000, after negotiating with the company.
From all these, I learnt that in order to move forward, one needs to change to go on a different career path and also learn to sacrifice.
As a remisier, the income was good. In one month, one could make between RM30,000 to RM50,000, and sometimes more. In a year, there are maybe one or two good months. The other months, "sleeping" time. When it was busy, I talked until my cheek hurt. When it was quiet, there’s maybe one call per day. When the market was busy, I had four phones. That’s too busy! After five years, I decided that the job was not suitable and I attending a course called ‘Money and You’.
It started with a goal: The sketch of Yee's dream home, taken from his book 'The Certain Way
To Life's Riches'
Actually, I attended many self-development courses to find out what was wrong with me. I found out that there was nothing wrong with me. There’s something wrong with my formal education! So I had to complement my formal education with not-so-formal education. In that seminar (Money and You), they said, “Do you like what you do?” If you don’t like, then you are like a prostitute. You only like the money, but you don’t like the job." Then I thought, “Eh! I feel like a prostitute.” [laughs]. So I resigned and managed to pull out some capital from the deposit . That is the beginning of my property investment career.
At that time, my wife was also looking for a location for a business. And that’s why I came to Selayang. We found a place with a 3+2 agreement, meaning 3 years of fixed rent, while 2 years float. After three years, there was some money coming in. So, I approached the landlord and he increased my rental from RM1,200 to RM2,200. When I asked him to reduce the rent, he shouted at me, “If you don’t like, many other people want to rent!”
It was very hard for me to accept that the world is so merciless. It won’t work to pay him endlessly. So we did something for ourselves. So we really thank that man, Mr Chan. Because of him, we have many shops now. Otherwise, we would still be renting.
What’s the board game about? Why did you create it?
I created the board game about 10 years ago. At that time, I like to play board game. You know, Robert Kiyosaki’s cash flow game? I enjoyed that game very much but I feel that his game missed something out. His game focuses mainly on financial intelligence. In life, finance is one of the important parts. But what about the other parts? Personal, health, relationship with family. So in my board game, we have financial intelligence but we added other aspects. Emotion, relationship, career, society, health and knowledge. It’s about how you balance these six aspects. For example, if you spend more time to make money from your job, then you will spend less time with your family. So how do you balance?
But then, when you talk about balance, if you don’t have passive income, how are you going to balance? So, that’s why I wrote this book (You Can Become Rich In Property). If you have passive income, then it frees you. This means more free time to balance other things.
The second book (The Certain Way To Life’s Riches) is about laws of attraction, about how to make things happen. People usually only look at the results. They don’t look at the steps. So I give them the steps.
How long did it take for you to build your dream home?
During a meeting with my friends, everyone set their goal. We wrote it down and presented to one another. This is my picture [shows a sketch that’s included in his book]. I wanted a house on a hill. That’s the beginning.
I bought three bungalows on separate occasions, but they were not suitable. Later on, I sold one condo to buy a piece of land and I sold one shop to build the house. And this is the view I see [showing another picture in his book]. Compared to the sketch, it’s quite similar, but the duration took about six years.
So I believe that anybody can create their own things as long as they really want it and really focus on it. The result is that my dream house is actually free.
How long have you stayed in your dream home?
About five years. It is just five minutes from this shop. So, if there’s anything that you want, write it down. And then list the steps on how to make it happen. I put my sketch in front of my bed and looked at my drawing in the morning, during transient periods and before I sleep. It has to do with mindset. Whatever I did , it was all to realise my dream house.
What kind of challenges did you face in that six years, while achieving your goal?
There were challenges! For example, there was one house was attracted to me. Initially, the owner wanted to sell it for RM400,000, but I did not have the money. But I still wanted the house. I was renting then. I said to myself, “I want!. But no money, how to buy?”. Six months later, the seller asked, “You want the house or not?”. I answered I want! So the seller said, “Why? What happened? Is it the price?”. I told the seller that it was the price and she said, “OK. I’ll come to your house. We talk.”
After negotiating, the seller agreed to RM365,000. So I bought the house. I just had enough for the 10% down payment. I was a remisier then. I wanted to speed up the process. So I speculated in the market and I lost half of the money! I was supposed to sign the S&P (Sales & Purchase Agreement) within two weeks. It took a few months for me! [laughs].
The seller waited for you?
Yes.
What are the other examples of laws of attraction that worked in your favour?
There was one from the auction market. I went all the way to Shah Alam to bid for it and I got it. Initially, the seller asked for RM330,000. But I did not have enough money, so I ignored it. Then the seller called me back and reduced to RM300,000 three months later. Six months later, the seller called me again and reduced further to RM264,000.
It’s things like that. It attracts, as long as your mind persists on having something, whatever it may be.
Dreams do come true: The view from Yee's hilltop home, which is similar to the sketch he drew.
Photo taken off Yee's second book 'The Certain Way To Life's Riches'.
What is your property portfolio like?
Mixed. Some from auction and some from sub-sale (existing buildings).
From your property investments, what are some of the key learning?
It is better to stay on landed property as the rental is not as good. So you rent to yourself.
After I resigned as a remisier, I went to a property exhibition. Within a day, I bought two properties with cash (from my remisier deposit). My learning is to never buy property like that. You must do some research.
There’s another one where the sales person told me that the property will be completed with CF (Certificate of Fitness) within a week. It took one year and the price went down.
It was RM143,000 during launch and the current market value is about RM130,000.
Do you still have that property?
Yes. It is still rented out. Another lesson is to never take free advice [laughs]. I had a friend who stayed in an apartment who told me that the area has an investment future. So I bought two units. I bought it at RM80,000 in year 2000 and another unit at RM85,000. The market value now is about RM75,000. But in life, you should never give up also [laughs]. Even if you made a wrong decision already, you can still make it right. So I averaged it by buying three more units at RM53,000, RM47,000 and RM56,000. The average investment is less than RM75,000. So, never give up on life. Think positive.
Do you still have these five units?
Yes, still keeping all.
Any other examples?
There is one unit that I bought from a company. It took six months to negotiate. There were three directors. Two will agree, then the other disagrees. Two will sign the cheque, and the other one is overseas. My learning? Buying property needs patience, especially when you want to get below market price. I also learnt to not buy properties that are too far away. When a property is near you, it is easy for you to go and see. Now, it is easier still because I live on a hill. So I just need to see if the rented units have lights on at night [laughs].
I also bought a land with 20 other people. I am a minor shareholder. The market value at that time is RM20 million. Now the price has gone up. RM20 million has become RM40 million. My learning is that capital gain is mostly from the land. Building gives you the cash flow. Building is a deteriorated cost. It needs repair.
What happened to the land?
A developer is planning to build a 5-storey strata title shops. That is the best deal. The land appreciates, then you build your own and make money all the way.
What’s your passive income?
Sometimes more, sometimes less. I am also not sure of the exact figure. But it is more than enough to cover my expenses. I am financially free, because my properties' passive income is enough to support my expenditure. My personal expenditure is very low.
What types of courses or seminars do you conduct?
We have a few property courses conducted at this centre. I even give a one-year free coaching. This is because of the mission I set, hence I do not mind as long as they purchase properties. My seminars are available for a few hundred Ringgit only. It is cheaper, but they have to come here (Selayang). After my class, when the participants are not sure if they should purchase a property or not, they can make an appointment with me. I will give my opinion so that they will make less mistakes.
I will also give relevant CDs, advise on recommended readings and all details necessary for them to get started. There are three courses. One is How to Make Money from Residential Property with Little/ No-Money-Down. This one is suitable for those who are new to property investment, for those with no property yet and little savings. They will learn about money management, what is financial freedom, what is No-Money-Down, how to manage tenant and eventually buy their own home.
Second one is How to Make Money from Commercial Property?. This course is for those with some savings between RM100,000 and RM200,000. It is not advisable for beginners to attend. If they attend, they will learn the best techniques, but when they go back, they will get stressed out because they cannot go forward. From each commercial property deal, one can make RM50,000 to RM100,000. But one would need some capital.
I make the learning easy and I share a checklist which I use as well.
What if there is only one participant? Do you still conduct the workshop?
No. At least 10 people.
What’s the third workshop?
It is How to Make Money from Auction Property?. You can make a lot of money from auction properties, if you know how to. But there is a lot of risk as well. If you are interested in commercial auction, then it is better for you to attend the commercial class first.
What’s your next goal?
You really want to know? [laughs]. We want to create a balanced life city called Inova city. A city where people work and play. I have 30 years to do it. So I will continue working until then. It is based on the concept of a balanced life. For example, a mother who works close to her child’s day care centre.
Any advice for people who wants to start investing, apart from coming to your workshops?
Read up, especially those from local authors, and subsequently read those from the international scene. And then, attend all the suitable seminars.
Do you have any specific go-to strategies?
It depends. For No-Money-Down, use as little of your own money and look for properties below market price. Stretch the loan, rent out the place and make sure that rental is more than the instalment. After that, go for your second one. Make sure that the instalments do not eat into your salary. After second one, go for your third one. Maybe purchase one property every three to six months.
What is the best and worst advice you have received?
The worst advice I received was free advice. [laughs]
Unless it is from someone who knows better!
Yes. Correct. The best advice I received was also free advice from a professional. We knew each other from the property field. He gave me one good advice, which is to buy property in a rich man’s area, not in a poor man’s area. I took that advice and made a lot of money.
But not everyone can afford those areas.
[laughs] So, begin with a poor man’s area for cash flow. Whether the market iis up or down, you can still get tenants. When people buy bungalows, it is like buying dreams. Like my dream home, I didn’t care how much. I just wanted it. Many rich people got richer dreams, so they are willing to pay the price.
For information on Dr Peter Yee’s one-day workshops, visit www.balancelifesuccess.com,e-mail info@balancelifesuccess.com or call 017-2491077.
Thursday 17 June 2010
Asia moves to contain property bubbles
Asia moves to contain property bubbles
June 17, 2010 - 11:49AM
From Shanghai to Singapore, policy makers are struggling in their efforts to curb property bubbles that threaten to derail the world's fastest growing region.
In China, home prices are surging at a record pace even after authorities set price ceilings, demanded higher deposits, and limited second-home purchases. In Hong Kong, where the government has pledged to release more land to cool prices, a site auctioned on June 8 fetched the most since the market peak of 1997. It's a similar story in Singapore and Taiwan as prices defy cooling measures.
"Governments allow the property bubble to get so big and then try to use administrative measures to keep out speculators," said Andy Xie, former Morgan Stanley chief economist for Asia-Pacific and now a private economist based in Shanghai. It creates the risk of a very hard landing. The right thing to do is raise interest rates."
The International Monetary Fund has cautioned that Asia's booming home prices "pose risks to financial stability." Governments in the region are turning to market curbs rather than raising interest rates - at 20-year lows in some places -- in an effort to avert a US-style property crash. While real estate prices have yet to respond, equity investors have: a Bloomberg index of 192 Asia-Pacific real estate stocks has lost 15 per cent in 2010 versus a 1.5 per cent gain for its US peer.
"The property bubbles in Asia right now are reminiscent of the US before the subprime crisis because they are both fuelled by debt when interest rates are too low," Xie said.
Hong Kong had its first signal this week of a possible turn in the market, when billionaire Lee Shau-kee's Henderson Land Development Co. announced that sales of 20 luxury apartments had been canceled, including a unit that would have set a world record price of $HK88,000 ($13,100) per square foot.
Lending Binge
China, while keeping interest rates steady, has restricted pre-sales by developers, curbed loans for third-home purchases, raised minimum mortgage rates, and tightened down-payment requirements for second-home purchases. The government is trying to peel back the effects of a $US586 billion stimulus plan and $US1.4 trillion lending binge that revived economic growth and sparked record property price increases.
China's banking regulator this week said it sees growing credit risks in the nation's real-estate industry and warned of increasing pressure from non-performing loans.
Risks associated with home mortgages are growing and a "chain effect" may reappear in real-estate development loans, the China Banking Regulatory Commission said in its annual report published on its website June 15.
While prices have yet to drop, sales volumes have. Property sales in Beijing, Shanghai and Shenzhen fell as much as 70 per cent in May. China Vanke Co., the nation's biggest publicly traded property developer, said its sales fell 20 per cent in May from a year earlier. Guangzhou R&F Properties Co.'s contracted sales last month shrank 48 per cent.
Cut Estimates
Property prices rose 12.4 per cent in May, compared with a record 12.8 per cent increase in April, from a year earlier, indicating price declines are not keeping pace with the drop in transactions. The value of sales last month slid 25 per cent from April. The data series, covering 70 cities, began in 2005.
JPMorgan Chase analysts on June 8 cut their profit estimates for China's developers by an average 9 per cent in 2010 and 11 per cent in 2011 on a "sUSantial slowdown" in sales.
China Se Shang's Property Index has tumbled 28 per cent this year, with 32 of 34 members declining, led by Shanghai New Huangpu Real Estate Co. and Poly Real Estate Group Co.
Hong Kong may increase sales taxes on some properties, is accelerating land auctions, and is scrutinizing developers' sales techniques. US Singapore plans to increase the supply of land for housing, has barred interest-only mortgages for uncompleted homes, and levied a seller's stamp duty on some properties.
'Regulatory Measures'
Taiwan's financial regulator asked the bankers' association to tighten lending procedures, while two state-owned lenders have raised mortgage rates and cut the amount of loans for buyers of luxury homes and property investors. Interest rates on the island have been at a record low since February 2009.
"The regulatory measures are not aiming to crash the whole property market, they are aiming to cool the speculative end," said Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management (Asia), which oversees $US11 billion. Do is underweight Asian property in his funds and is looking to buy back into the worst hit Chinese property stocks.
Home prices in Hong Kong have risen almost 40 per cent from the beginning of 2009, driven by interest rates at 20-year lows, lagging supply growth and buying from rich mainland Chinese. The risk of a property bubble remained in the city amid liquidity and low interest rates, Norman Chan, chief executive of the Hong Kong Monetary Authority, said May 20.
Potential home purchasers should consider their ability to pay before taking out mortgages, Financial Secretary John Tsang said June 9, a day after a residential site sold at a public auction for $HK10.9 billion, beating estimates.
In Taipei, home prices climbed 3.4 per cent in May from April, Sinyi Realty Co., the biggest housing broker in Taiwan, said May 31. They have risen 29 per cent to a record since September 2008 when the collapse of Lehman Brothers Holdings Inc. deepened the global credit crisis.
Singapore Sales
Private residential sales in Singapore rose to a nine-month high of 2,208 in April, the Urban Redevelopment Authority said, the highest since July 2009, showing the "resilience" of demand for new homes even after the government curbs, Li Hiaw Ho, executive director of CB Richard Ellis Research, said then. Sales dropped to 1,078 units in May.
There continues to be concerns over "excessive" asset- price inflation in emerging Asia, the Singapore government said May 20. If asset prices correct too sharply in China, it could have "negative spillover" effects on regional economies, Ravi Menon, permanent secretary at the Singapore trade ministry, told reporters the same day.
The failure to raise rates may allow the bubble to keep swelling, said Stephen Halmarick, Sydney-based head of investment-markets research at Colonial First State Global Asset Management, which manages about $US135 billion.
"The lesson of subprime is that, if you let asset prices go too far for too long, the correction can be very damaging," he said.
Bloomberg News
Source: theage.com.au
http://www.smh.com.au/business/world-business/asia-moves-to-contain-property-bubbles-20100617-yhu1.html
June 17, 2010 - 11:49AM
From Shanghai to Singapore, policy makers are struggling in their efforts to curb property bubbles that threaten to derail the world's fastest growing region.
In China, home prices are surging at a record pace even after authorities set price ceilings, demanded higher deposits, and limited second-home purchases. In Hong Kong, where the government has pledged to release more land to cool prices, a site auctioned on June 8 fetched the most since the market peak of 1997. It's a similar story in Singapore and Taiwan as prices defy cooling measures.
"Governments allow the property bubble to get so big and then try to use administrative measures to keep out speculators," said Andy Xie, former Morgan Stanley chief economist for Asia-Pacific and now a private economist based in Shanghai. It creates the risk of a very hard landing. The right thing to do is raise interest rates."
The International Monetary Fund has cautioned that Asia's booming home prices "pose risks to financial stability." Governments in the region are turning to market curbs rather than raising interest rates - at 20-year lows in some places -- in an effort to avert a US-style property crash. While real estate prices have yet to respond, equity investors have: a Bloomberg index of 192 Asia-Pacific real estate stocks has lost 15 per cent in 2010 versus a 1.5 per cent gain for its US peer.
"The property bubbles in Asia right now are reminiscent of the US before the subprime crisis because they are both fuelled by debt when interest rates are too low," Xie said.
Hong Kong had its first signal this week of a possible turn in the market, when billionaire Lee Shau-kee's Henderson Land Development Co. announced that sales of 20 luxury apartments had been canceled, including a unit that would have set a world record price of $HK88,000 ($13,100) per square foot.
Lending Binge
China, while keeping interest rates steady, has restricted pre-sales by developers, curbed loans for third-home purchases, raised minimum mortgage rates, and tightened down-payment requirements for second-home purchases. The government is trying to peel back the effects of a $US586 billion stimulus plan and $US1.4 trillion lending binge that revived economic growth and sparked record property price increases.
China's banking regulator this week said it sees growing credit risks in the nation's real-estate industry and warned of increasing pressure from non-performing loans.
Risks associated with home mortgages are growing and a "chain effect" may reappear in real-estate development loans, the China Banking Regulatory Commission said in its annual report published on its website June 15.
While prices have yet to drop, sales volumes have. Property sales in Beijing, Shanghai and Shenzhen fell as much as 70 per cent in May. China Vanke Co., the nation's biggest publicly traded property developer, said its sales fell 20 per cent in May from a year earlier. Guangzhou R&F Properties Co.'s contracted sales last month shrank 48 per cent.
Cut Estimates
Property prices rose 12.4 per cent in May, compared with a record 12.8 per cent increase in April, from a year earlier, indicating price declines are not keeping pace with the drop in transactions. The value of sales last month slid 25 per cent from April. The data series, covering 70 cities, began in 2005.
JPMorgan Chase analysts on June 8 cut their profit estimates for China's developers by an average 9 per cent in 2010 and 11 per cent in 2011 on a "sUSantial slowdown" in sales.
China Se Shang's Property Index has tumbled 28 per cent this year, with 32 of 34 members declining, led by Shanghai New Huangpu Real Estate Co. and Poly Real Estate Group Co.
Hong Kong may increase sales taxes on some properties, is accelerating land auctions, and is scrutinizing developers' sales techniques. US Singapore plans to increase the supply of land for housing, has barred interest-only mortgages for uncompleted homes, and levied a seller's stamp duty on some properties.
'Regulatory Measures'
Taiwan's financial regulator asked the bankers' association to tighten lending procedures, while two state-owned lenders have raised mortgage rates and cut the amount of loans for buyers of luxury homes and property investors. Interest rates on the island have been at a record low since February 2009.
"The regulatory measures are not aiming to crash the whole property market, they are aiming to cool the speculative end," said Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management (Asia), which oversees $US11 billion. Do is underweight Asian property in his funds and is looking to buy back into the worst hit Chinese property stocks.
Home prices in Hong Kong have risen almost 40 per cent from the beginning of 2009, driven by interest rates at 20-year lows, lagging supply growth and buying from rich mainland Chinese. The risk of a property bubble remained in the city amid liquidity and low interest rates, Norman Chan, chief executive of the Hong Kong Monetary Authority, said May 20.
Potential home purchasers should consider their ability to pay before taking out mortgages, Financial Secretary John Tsang said June 9, a day after a residential site sold at a public auction for $HK10.9 billion, beating estimates.
In Taipei, home prices climbed 3.4 per cent in May from April, Sinyi Realty Co., the biggest housing broker in Taiwan, said May 31. They have risen 29 per cent to a record since September 2008 when the collapse of Lehman Brothers Holdings Inc. deepened the global credit crisis.
Singapore Sales
Private residential sales in Singapore rose to a nine-month high of 2,208 in April, the Urban Redevelopment Authority said, the highest since July 2009, showing the "resilience" of demand for new homes even after the government curbs, Li Hiaw Ho, executive director of CB Richard Ellis Research, said then. Sales dropped to 1,078 units in May.
There continues to be concerns over "excessive" asset- price inflation in emerging Asia, the Singapore government said May 20. If asset prices correct too sharply in China, it could have "negative spillover" effects on regional economies, Ravi Menon, permanent secretary at the Singapore trade ministry, told reporters the same day.
The failure to raise rates may allow the bubble to keep swelling, said Stephen Halmarick, Sydney-based head of investment-markets research at Colonial First State Global Asset Management, which manages about $US135 billion.
"The lesson of subprime is that, if you let asset prices go too far for too long, the correction can be very damaging," he said.
Bloomberg News
Source: theage.com.au
http://www.smh.com.au/business/world-business/asia-moves-to-contain-property-bubbles-20100617-yhu1.html
Thursday 29 April 2010
Property valued properly
GREG HOFFMAN
April 23, 2010When the Beagle sailed into Sydney harbour in January 1836, Charles Darwin wrote: "The number of large houses and other buildings just finished was truly surprising; nevertheless, every one complained of the high rents and the difficulty in procuring a house."
Some things never change. Rents always feel high if you're paying them, as does mortgage interest, but they're both obviously limited to what people are earning.
Over time, though, you'd expect the earning power of property (the rent it can generate—or save you if you live there) to rise roughly in line with the growth in average wages.
Over the very long term it has to be this way - it's not possible for people to pay more than their income in rent. In its 2001 yearbook, the Australian Bureau of Statistics (ABS) published a book full of statistics regarding the previous century of federation.
Figure 1: A century of rent 1901 2001
Average weekly earnings (2001 dollars):
$217.50 $830
Average rent on a 3 bedroom home (2001 dollars)
$65 $250
% of income spent on rent 29.9% 30.1%
Source: ABS
Source: ABS
The average weekly wage for an adult male grew from "$4.35 for a working week of almost 50 hours, which after inflation equates to $217.50", to "$830.00 for around 37 hours work, in far better conditions."
So salaries averaged annual growth of 1.35% over and above inflation.
When it comes to rent "the average weekly rent for a three bedroom house in 1901 was $1.30, equivalent to about $65.00 today. The actual value today varies depending on location, but the average of eight capital cities for a three bedroom house is about $250 a week."
At 1.36% per year, the average growth in real rent was almost identical to the growth in salaries. It seems a fair assumption that this relationship will be maintained.
This assumed growth rate of income (rent in this case) is a key factor in any genuine valuation of an asset. And I'd like to take you through a valuation I conducted in 2008 on my former rental residence, a townhouse in Sydney.
Valuation case study
This analysis was based on the expected cash the property would produce (or save me in rent) over its life; not a finger-in-the-air, hope-based assumption of continued price appreciation forever and a day. Here's how I went about it.
The first important input into my valuation was my “discount rate”, this is the rate of return I demand from my investment. When dealing with shares, I aim for something close to 15%. But due to the psychological and emotional benefits of home ownership, I was prepared to accept a lower return on a property investment; 10%.
Next, I need to consider how much of that return is likely to come from future income growth. I was generous to my property valuation in assuming that, in the modern era, wages growth (and therefore rental growth) can average about 2 per cent above inflation.
With the RBA targeting inflation of 2–3 per cent, I took a long-term rental growth of 4–5 per cent; although that rate is some margin above the real long-term growth rate, an assumption which serves to flatter the valuation and push it higher.
Total return
So, having settled on a targeted annual return of 10 per cent per annum and estimating future rental growth at 5 per cent per year, some simple subtraction told me the initial rental yield I needed to buy the property on; 5 per cent.
If my yield was below that figure, I couldn't realistically hope to achieve my long-term aim of a 10 per cent return. At the time, the rent being asked when I moved out was $850 a week, or $44,200 a year.
Out of this, however, the owner must meet the property's costs. I estimated these at about $6,700 (including $4,000 strata fees, $2,000 for repairs and maintenance and $700 for water fees).
The figure for strata fees could easily be higher. And, if you already own a property, you probably know of a dozen different "one-off" expenses I haven't thought of.
Anyway, for the purpose of my valuation, I was left with a net rent of $37,500, and for that to provide a yield of 5 per cent, I'd reach a value of $750,000 (the rent of $37,500 divided by 0.05).
If I were going to use the property as an investment, then I should also factor in the costs of managing the property (or my own time costs). A typical real estate agent's management fee would be 7 per cent of gross rent, amounting to about $3,000 a year and taking the net rent in this case down to $34,500.
On top of this, I'd have to reckon on an average of maybe about a week a year (being optimistic) where the place would be between tenants and therefore not paying me anything.
This brought the annual rent down to $33,650 and my valuation down to $673,000. So my valuation would range between that figure (as a pure investment) and $750,000 as a family home with no management costs.
So how far was my valuation from the price at the time? Well, the virtually identical townhouse next door sold at the time for $1.175 million (down from an asking price of $1.4million).
On my figures, the purchaser was accepting an initial rental yield of just 3.2 per cent. Adding a generous 5 per cent annual growth rate for rent, and the overall return would be 8.2 per cent (or 7.9 per cent if you subtract management costs).
For me, this just didn't cut the mustard and I moved up the road to rent another property. But I'd be interested in hearing the calculations being conducted by anyone paying today's prices for property.
I've certainly been out of step with the market for many years, so I'm open to the possibility that my logic is faulty. Or perhaps my ambitions of a 10 per cent total return are too lofty.
This article contains general investment advice only (under AFSL 282288).
Greg Hoffman is research director of The Intelligent Investor. BusinessDay readers can enjoy a free trial offer at The Intelligent Investor website. For more Intelligent Investor articlesclick here.
Monday 15 March 2010
Buy in haste, repent at leisure
Buy in haste, repent at leisure
2010/03/15
MEERA MURUGESAN
Before buying any property, seek professional consultation, advises MEERA MURUGESANThey had found their dream home, or so they thought.
Being first-time house buyers, the couple were eager to land the property.
A month after moving in, Jeff and Anita realised they had made a mistake.
The house had been advertised as “move-in condition” but the couple soon found themselves forking out huge sums for repairs.
“We had endless internal plumbing problems and had to redo wiring for the entire house. We are paying so much for repairs because something gets broken all the time,” Anita says. In their eagerness to secure the property, they failed to notice the hidden costs that would incur from the purchase.
“The previous owner had painted the place and patched things up to make it look presentable so we failed to notice just how bad the condition of the place really was,” says Jeff.
For Farah, a single executive from Petaling Jaya, her dream of owning a condominium has ended in frustration.
She signed up to purchase a yet-to-be built condominium from a developer during a home owner’s campaign in 1999.
She liked the location of the condominium, the facilities promised and the fact that the developer seemed reputable. She was confident of getting ownership of the property by 2002.
Chang advises buyers to appoint their own lawyers |
Unfortunately, for Farah, the developer went bankrupt in 2001 and till today, there has been no news of the project being revived.
“I paid close to RM10,000 to complete the initial transactions. I’m still servicing my loan for the property but I don’t have a home," says a disgruntled Farah.
Despite frequent meetings with the developer’s representatives and even lodging a complaint with authorities, Farah and other affected house buyers are no closer to seeing their dream become a reality.
“The developer has been asking buyers to fork out more money to revive the project. Yet they can’t give any assurance on when the project will be completed," Farah says.
The cases above are classic examples of challenges faced by house buyers in Malaysia and the common mistakes some first-time purchasers make, says Chang Kim Loong, honorary secretary-general of the National House Buyers Association (HBA).
Chang says for many people, the purchase of a house or apartment is the most important financial decision of their lives. Unfortunately, one wrong move can result in a lifetime of problems.
As in Anita and Jeff’s case, many people pay for a house and discover defects later which cost them thousands to repair.
Chang explains that this would not have happened if the couple had hired a professional, such as an independent building inspector or quality consultant to report on the condition of the house and check for permitted renovations against shoddy renovations before they made the purchase.
In fact, the report would have given them additional room for negotiation with the seller.
In America and Canada, home inspections are standard practice in the purchasing process.
Home inspectors conduct inspections of newly-built or previously owned homes.
Another mistake that many house buyers make is failing to appoint their own lawyer before starting any transaction with the present owner of the property.
“The first rule of conveyancing is that the buyer must engage his own lawyer and consult a lawyer right from the start, and not after you have paid the deposit,” Chang says. In most cases, a lawyer would be able to complete the transaction.
However, lawyers with a focused real estate practice may prove a better tool if the buyer is unsure of what to do or if there are complications in the purchase agreement or mortgage.
“While you may think you cannot afford the services of your own lawyer, consider whether you can afford not to,” cautions Chang.
A lawyer ensures that his client’s rights and interests are protected and that his client is aware of the rights, risk and responsibilities before signing an agreement.
They also ensure that negotiations lead to a fair agreement binding each party to the contract with no uncertainties.
Chang says a lawyer should not be representing both parties in the sale. If, for example, the buyer decides to use the seller’s lawyer, when disputes happen, that lawyer is unlikely to represent him against his client.
When purchasing a home from a developer, many house buyers are also easily taken in by phrases such as “free legal fees” in the developer’s brochure.
Chang says in these type of transactions, the developer recommends a lawyer to the buyer to attend to the sale contract and the developer pays the lawyer’s fees.
The buyer is given the impression that if he uses this recommended lawyer, he gets things done free.
In reality, the recommended lawyer has a conflict of interest. He or she is on the developer’s panel and would be receiving work from current or future projects from the developer.
“How can such a lawyer act impartially for the buyer if problems arise later such as delay in delivery of vacant possession or shoddy workmanship? That’s why it’s always advisable for each party to appoint its own lawyer,” says Chang.
When purchasing from a developer, many people also make the mistake of assuming that a developer’s property is a guaranteed investment or that the property will be completed and delivered with vacant possession and a certificate of completion and compliance. In fact, Chang says, consumers must first understand the difference between a “Sell-Then-Build” (STB) or “Build-Then-Sell” (BTS) variant property. Understanding the difference could save a lot of heartache and financial loss.
STB means buyers will finance the building of the property in progressive stages. It’s like buying a car and paying for it progressively.
“For example, when the car doors are fixed, 10 per cent is paid, when the tyres are fixed, another 10 per cent is paid, when the engine is installed, 15 per cent is paid and so on,” Chang says.
On the other hand, a BTS property means the developer substantially finances the building of the property. It means buyers will pay only after the whole “car” is completed and delivered in good working order, with the authorities’ approval. Chang says if the STB property is not completed, buyers are stuck in the sale contract with huge amounts of money already paid to the developer.
But if the BTS property is not completed, buyers can opt to break away from the contract with relatively smaller losses.
The HBA has always advocated the BTS concept as it has been tried and tested successfully in neighbouring countries and prevents buyers from being burdened with problems such as shoddy workmanship or abandoned projects.
“It is a more straightforward and secure deal for buyers,” says Chang. Auction properties also come across as very attractive to many prospective buyers because of the lower pricing but consumers may not realise the hidden dangers involved.
As the auction properties are sold on an “as is where is” basis, this means new buyers assume responsibilities for whatever encumbrances or outstanding debts on the property.
Chang says the property may also have many problems such as broken water pipes or old electrical wiring that buyers usually discover only after taking possession.
Buyers must bear in mind that there is little chance of any physical inspection of the property prior to purchase and delivery of vacant possession is also not guaranteed.
HBA has Meet the Public Sessions on Saturdays from 1pm- 5pm at its Advice Centre in Jalan Imbi, Kuala Lumpur. For more information, visit www.hba.org.my.
Saturday 30 January 2010
Investment in Property
Property is one of the main asset classes, the first investment most people make, and usually their biggest asset.
Investment in property offers the promise of
But you must also be aware that the capital value of your property can depreciate (or decrease) over time, therefore property is a medium- to high-risk investment.
One of the advantages of investment in property is gearing or leverage. This is the use of debt in the form of mortgage bond finance to 'leverage' you or help you to acquire an asset you would not otherwise be able to afford.
With a little financial help from your banking friends, you will, it is hoped, make a good capital gain on your investment one day.
There are different ways of investing in property.
Your own home
An own home is often the biggest asset in one's investment portfolio.
For most people, paying off their house takes up most of their earnings. They are using their mortgage bond to leverage them, possibly with the hope of making a capital gain one day.
Paying off a mortgage on your own home is one of the best investments you can make, and a golden rule to remember is that you should pay off your mortgage bond before you start thinking about investing in other asset classes.
As an own home can be a medium- to high-risk investment, you should be aware of the following dangers:
An investment portfolio of properties
Buying a property with a view to letting it and using the rental income to cover your mortgage bond payments (with the mortgage interest often tax-deductibe) while you benefit from the capital appreciation of the property sounds like a great investment strategy. So why do not more people do it?
The reason is perhaps because there are so many pitfalls in propety investment. Some of these are:
Property investing on the stock market
Property investing on the stock market gives the small investor the chance to invest in property in a more liquid way. You can sell your investment without having to sell a physical property, and you gain access to the propety expertise and scale benefits of large projects. There are three sectors in the stock market property division in which you can invest, namely:
These entities normally perform well in a falling interest rate environment, but, as with all property investments, are vulnerable to
Additional notes:
The concept of gearing: This can be explained by the following example. Say you have put down a deposit of $200,000 to buy a property of $1 million. Within two years, the property's value increases by 10% to $1.1 million. This means you have actually used $200,000 to earn $100,000 (i.e. 50% return) with the help of your bank manager!
Beware of property gains tax: This can reduce the attractiveness of investment property. Property gains tax can take a significant chunk of your capital gain when you sell property and will make it more difficult for this investment to beat inflation.
Investment in property offers the promise of
- an appreciation (or increase) in capital and
- a regular income in the form of rental payments.
But you must also be aware that the capital value of your property can depreciate (or decrease) over time, therefore property is a medium- to high-risk investment.
One of the advantages of investment in property is gearing or leverage. This is the use of debt in the form of mortgage bond finance to 'leverage' you or help you to acquire an asset you would not otherwise be able to afford.
With a little financial help from your banking friends, you will, it is hoped, make a good capital gain on your investment one day.
There are different ways of investing in property.
- On the one hand, you can simply own your own home in which you live.
- On the other hand, you can own an investment portfolio of different properites with a view to earning a rental income or capital profit from them.
- A third way to invest in property is through the stock market.
Your own home
An own home is often the biggest asset in one's investment portfolio.
For most people, paying off their house takes up most of their earnings. They are using their mortgage bond to leverage them, possibly with the hope of making a capital gain one day.
Paying off a mortgage on your own home is one of the best investments you can make, and a golden rule to remember is that you should pay off your mortgage bond before you start thinking about investing in other asset classes.
As an own home can be a medium- to high-risk investment, you should be aware of the following dangers:
- Property is highly illiquid. This means you do not have immediate access to the value of your property should you need cash (although you could use your mortgage bond facility), and if you decide to sell your house, there is no guarantee that you will be able to do so quickly.
- The value of your house is influenced by many factors over which you have no control, such as political factors and economic and interest rate cycles.
An investment portfolio of properties
Buying a property with a view to letting it and using the rental income to cover your mortgage bond payments (with the mortgage interest often tax-deductibe) while you benefit from the capital appreciation of the property sounds like a great investment strategy. So why do not more people do it?
The reason is perhaps because there are so many pitfalls in propety investment. Some of these are:
- Large amounts are required to invest in property.
- Properties need to be managed. Difficulties include problems with tenants, payments on time, maintenance, etc. and these must all be factored into your calculations.
- There is a high risk of bad timing in property investment. Certainly, you can make substantial capital gains, but only if you buy and sell the property at the right time.
Property investing on the stock market
Property investing on the stock market gives the small investor the chance to invest in property in a more liquid way. You can sell your investment without having to sell a physical property, and you gain access to the propety expertise and scale benefits of large projects. There are three sectors in the stock market property division in which you can invest, namely:
- property companies,
- property loan stocks, and
- property unit trusts or REITS
- the age,
- location and
- type of property in which it invests.
These entities normally perform well in a falling interest rate environment, but, as with all property investments, are vulnerable to
- interest rate cycles and
- economic and political change.
Additional notes:
The concept of gearing: This can be explained by the following example. Say you have put down a deposit of $200,000 to buy a property of $1 million. Within two years, the property's value increases by 10% to $1.1 million. This means you have actually used $200,000 to earn $100,000 (i.e. 50% return) with the help of your bank manager!
Beware of property gains tax: This can reduce the attractiveness of investment property. Property gains tax can take a significant chunk of your capital gain when you sell property and will make it more difficult for this investment to beat inflation.
Property - moderate to high risk
Property is often the biggest asset in a person's investment portfolio.
Property can keep up with inflation and can be a very effective way of gearing your investment.
This means that by using external financing you can increase the return on your investment. Debt in the form of a mortgage bond can help you to acquire an asset - and a return on this asset - you would not otherwise be able to afford.
The risk of property, however, is moderate to high.
Much depends on
One big drawback of this asset class is illiquidity: the fact that you cannot sell property as quickly as investments in other asset classes.
For that reason the safest option is to own your own home, but to leave property speculation (a potentially risky business) to the experts.
Property can keep up with inflation and can be a very effective way of gearing your investment.
This means that by using external financing you can increase the return on your investment. Debt in the form of a mortgage bond can help you to acquire an asset - and a return on this asset - you would not otherwise be able to afford.
The risk of property, however, is moderate to high.
Much depends on
- the location of the property and
- the political and economic environment.
One big drawback of this asset class is illiquidity: the fact that you cannot sell property as quickly as investments in other asset classes.
For that reason the safest option is to own your own home, but to leave property speculation (a potentially risky business) to the experts.
Monday 11 January 2010
Beijing is trying to prevent the property bubble from bursting.
China vows to keep ‘hot money’ out of property market
Beijing is trying to prevent the property bubble from bursting. — Reuters pic
BEIJING, Jan 10 — China vowed today not to let foreign speculative investment affect the property market, the latest expression of official concern that real-estate prices are racing ahead too fast.
The directive from the State Council, China’s cabinet, will serve as a guideline for local authorities and ministries, including the People’s Bank of China and the China Banking Regulatory Commission, to work out detailed policies.
“Relevant departments must enhance monitoring of loans and cross-border investment to prevent illegal inflows of capital into the property market and to avoid the impact of overseas hot money on China’s real-estate market,” the cabinet said.
It said the central bank and banking regulator should step up oversight and “window guidance” of mortgage lending.
About one-sixth of China’s nearly 10 trillion yuan (RM5 trillion) in new loans last year flowed into the property sector.
Concerned that a property bubble could stir social and economic instability, Beijing has vowed to combat overly fast price increases, although its moves to date, such as restricting sales tax exemptions, have been relatively mild.
The cabinet urged local authorities, especially in cities where housing prices are rising sharply, to increase the supply of affordable housing.
It reiterated that it would curb house buying for “investment and speculation purposes” and keep the minimum down payment for purchases of second homes at 40 per cent.
China’s central bank said this week that it would pay particularly close attention to the property market in 2010 while managing inflationary expectations. — Reuters
Beijing is trying to prevent the property bubble from bursting. — Reuters pic
BEIJING, Jan 10 — China vowed today not to let foreign speculative investment affect the property market, the latest expression of official concern that real-estate prices are racing ahead too fast.
The directive from the State Council, China’s cabinet, will serve as a guideline for local authorities and ministries, including the People’s Bank of China and the China Banking Regulatory Commission, to work out detailed policies.
“Relevant departments must enhance monitoring of loans and cross-border investment to prevent illegal inflows of capital into the property market and to avoid the impact of overseas hot money on China’s real-estate market,” the cabinet said.
It said the central bank and banking regulator should step up oversight and “window guidance” of mortgage lending.
About one-sixth of China’s nearly 10 trillion yuan (RM5 trillion) in new loans last year flowed into the property sector.
Concerned that a property bubble could stir social and economic instability, Beijing has vowed to combat overly fast price increases, although its moves to date, such as restricting sales tax exemptions, have been relatively mild.
The cabinet urged local authorities, especially in cities where housing prices are rising sharply, to increase the supply of affordable housing.
It reiterated that it would curb house buying for “investment and speculation purposes” and keep the minimum down payment for purchases of second homes at 40 per cent.
China’s central bank said this week that it would pay particularly close attention to the property market in 2010 while managing inflationary expectations. — Reuters
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