Hong Kong, a British colony from the 1840s to 1997, grew into an international finance center just off the coast of mainland China.
Anthony Kwan | Bloomberg | Getty Images
Asia-Pacific markets were mostly higher Friday, with China stocks rising for the ninth straight session as investors digested property prices data.
The CSI 300 index ended 0.09% higher at 3,489.74, extending its winning streak for nine days in a row. Hong Kong’s Hang Seng index was 0.13% lower in volatile trading.
Data showed sales prices of newly built commercial housing in first-tier cities fell 0.3% month-over-month in January, with declines narrowing by 0.1 percentage points from the previous month.
At the end of last year, the country’s troubled property market clocked its worst declines in new home prices in nearly nine years.
South Korea’s Kospi ended 0.13% higher at 2,667.70, while the smaller-cap Kosdaq closed 0.18% lower at 868.57.
In Australia, the S&P/ASX 200 closed 0.43% higher at 7,643.60.
Japan stocks were closed for trading on Friday for the Emperor’s Birthday holiday. Japan markets led gains in the previous session, with the Nikkei 225 closing at a new all-time high of 39,098.68, surpassing the previous record of 38,915.87 set in 1989.
Wall Street’s main indexes surged on Thursday, with the S&P 500 hitting a record high after chip giant Nvidia posted quarterly results that far exceeded estimates, boosting the tech sector.
The benchmark index gained 2.11% to close at 5,087.03, its best day since January 2023. The Nasdaq Composite jumped 2.96%, recording its best day since February 2023, while the Dow Jones Industrial Average gained 1.18%, to close above 39,000 for the first time and at a new high of 39,069.11.
— CNBC’s Pia Singh and Yun Li contributed to this report.
Suzhou, in eastern Jiangsu province, said this week that it would waive its “home buying eligibility check” for prospective buyers, which previously limited the number and location of houses an individual or a family could purchase in the city, based on their social insurance, personal income tax and residency status.
Buyers from across the nation will be allowed to buy both pre-owned and new homes in any of Suzhou’s six districts, the city’s housing department told the Post on Wednesday.
“Waiving purchase eligibility checks is the biggest possible relaxation to existing restrictions,” said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institute. “The new rule also amplifies and upgrades September’s 120-square-metre (1,290 sq ft) rule. Now, buyers can purchase houses of any size in Suzhou without any restrictions.”
The move comes as home prices in major Chinese cities fell at the fastest pace in nearly nine years in December. Prices of new homes in 70 medium and large cities eased 0.4 per cent month on month in December, following a 0.3 per cent decline in November, according to official data.
China home sales to disappoint in January, may fall by up to 15 per cent in 2024
China home sales to disappoint in January, may fall by up to 15 per cent in 2024
Suzhou, a city of more than 12 million residents, has previously experimented with similar measures. Last September, the municipal government said non-residents could enjoy the same qualifications as residents for buying property. Both groups could buy a maximum of three homes with areas of 1,290 sq ft or less. For larger houses, the cap was removed.
Shanghai and Guangzhou rolled out similar easing measures.
Shanghai’s housing ministry said on Tuesday that individuals who have paid income tax or social insurance in the city for at least five years in a row would be immediately eligible to buy one house in select districts, regardless of their residency status. The previous rule stipulated non-residents to be married to qualify for property purchases.
The change was intended to “satisfy residents’ reasonable housing needs and promote work-life balance across districts, in addition to facilitating the integration of cities and industries,” Shanghai’s housing ministry said in a social media post.
The Guangzhou government removed buying restrictions for houses measuring 1,290 sq ft or less on January 27.
“2024 is an important year for wholesale relaxation around housing purchases,” said Yan. “This is fundamentally different from the ‘local relaxation’ that we saw in 2023.”
The latest round of relaxations could prove to be the tonic China’s property market needs this year, he added.
Additional reporting by Yulu Ao
The New York-based asset manager is marketing the property in northwestern Shanghai at a reduced rate to speed up the sale, according to the people, who asked not to be identified because the information is private.
A representative for BlackRock declined to comment.
Finding a buyer in China’s current commercial property market may be difficult, with other institutional investors offloading offices as the weak economy and oversupply weigh on the sector. Falling rents and a global trend to reduce exposure to office assets make such properties less appealing to potential investors.
In Shanghai, office rents fell to their lowest level in almost a decade last quarter, and they might decline further this year due to a growing supply pipeline, according to Colliers International.
China property: why an uptick in Beijing, Shanghai home sales is unlikely to last
China property: why an uptick in Beijing, Shanghai home sales is unlikely to last
Prime offices in Beijing and Shanghai traded at capitalisation rates of about 5 per cent last quarter, the highest in more than a decade, Colliers data shows. A rise in the cap rate, which is a property’s net income divided by the transaction price, usually signals a decline in real estate values.
Grade A offices in Shanghai and Beijing used to be sought after by global real estate funds, making them more attractive than those in New York and London. Even in recent years, they largely avoided the challenges crushing global peers, such as rising interest rates and hybrid work arrangements.
But institutional investors have been selling such assets as prospects for the Chinese economy and oversupply weigh on the sector. That has added to the gloom in the country’s real estate industry, which has been grappling with an unprecedented slowdown in its residential market since 2021.
China’s once-mighty developers face brutal years after end of ‘golden age’
China’s once-mighty developers face brutal years after end of ‘golden age’
Part of the drag on prices has been caused by global real estate funds that faced pressure to exit their investments after Covid-19 delayed the process, said Jimmy Gu, a deputy managing director and co-head of capital markets and investment services at Colliers. Falling rents and a global trend to pare exposure to office assets also contributed.
In Shanghai, office rents shrank to the lowest in almost a decade last quarter, and they may decline further this year on a bigger supply pipeline, according to Colliers. In Beijing, net absorption of office space – a measure of occupancy – has only recovered to a third of the pre-pandemic level, signalling weak demand.
The transactions of new homes in Beijing jumped 38.5 per cent year on year to 6,106 units in December, bringing the total volume of new homes sold across the city to 66,000 units, or 74.9 million square metres. Meanwhile, new home prices rose by 0.17 per cent year on year and the prices of pre-owned homes dropped by 0.63 per cent in the same period.
An increase in new home sales was driven mainly by improved supply, instead of demand, said Chen Wenjing, director of market research at China Index Academy. “Overall, residents are still quite cautious about buying homes, and as the market enters into its off-season in January, sentiment will fall even more,” he said.
Improving transport, favourable policies may boost Greater Bay Area home sales
Improving transport, favourable policies may boost Greater Bay Area home sales
Wang Xingping, senior analyst of companies at Fitch Bohua, a subsidiary of Fitch Ratings, said the growing sales figures were linked to more quality listings entering the market and selling at higher price points, and were in no way indicative of a broad-based recovery in new home prices.
“Unless there is substantial improvement in buyer confidence, we do not think the trend of price increases will continue,” she said.
The pre-owned housing market is faced with even greater headwinds, analysts said, as second-hand homes usually have longer transaction cycles, and the imbalance between supply and demand in the second-hand homes market is more pronounced.
Ordinary buyers eye China’s foreclosed home bargains as investors retreat
Ordinary buyers eye China’s foreclosed home bargains as investors retreat
“Pre-owned homes are already hard to sell,” Chen said. “This, coupled with the fact that expectations of household incomes are still shaky, and homebuyers are hesitant to increase leverage [to buy homes], is putting a dent in demand.”
Gary Ng, a senior economist at French investment bank Natixis, said it takes time for policy support to translate into improved confidence, which, at the moment, is dampened by lower inflation.
“Developers would have greater incentive to sell as quickly as they can, and home prices will most likely flirt with deflation in the next few months,” he said.
Why China’s local governments are encouraging upgrades by homeowners
Why China’s local governments are encouraging upgrades by homeowners
Gao Yueqiu, a manufacturing industry professional living in the eastern coastal province of Shandong, said that she is interested in buying a flat for her daughter who lives and works in Beijing, but is facing many challenges.
“One of the main ones is permanent residency, which grants individuals or households the right to buy a home in a given city,” she said. “In order for someone who was not born in Beijing to buy property in the city, they need to at least have a work residence permit, which is not very easy to get.”
China’s property sector will rebound in 2024, developer forecasts
China’s property sector will rebound in 2024, developer forecasts
When asked about the effectiveness of the easing measures, Gao said the rules were “generally positive” for homebuyers and for Beijing’s property market, but she expects prices to keep dropping for a while.
“After all, there is too much inventory, and the population keeps falling … That said, if you put your money in the bank, you’re still losing money. The economy is bad and people have no place to invest their money, so placing your bet on Beijing’s property might not be such a bad idea.”
Shanghai’s rich seek refuge in overseas homes amid domestic property sell-off
Shanghai’s rich seek refuge in overseas homes amid domestic property sell-off
“The top priority for the government … in 2024 is the stabilisation of the Chinese economy,” said Alfredo Montufar-Helu, head of the China Center for Economics and Business at the Conference Board, a global non-profit think tank.
“Last year’s Central Economic Work Conference [CEWC] made it clear that the government will maintain a targeted and measured approach towards its stimulus measures to support growth as necessary, but without exacerbating systemic risks.
“With respect to the property sector, the mantra that ‘houses are for living in, not for speculation’ was not included in the official CEWC readout. In our view, this suggests that authorities are likely preparing to implement a range of targeted stimulus measures to help the sector bottom out from its current downturn and stabilise, which we believe is imperative for confidence levels to improve.”
China Index Academy’s Chen said that local governments could roll out more demand-side measures this year, including relaxing purchase restrictions on a “district-specific basis” in China’s first-tier cities, as well as providing subsidies to residents of lower-tier cities to encourage purchases.
(Yicai) Jan. 9 — Sales of new and pre-owned apartments in Shanghai bounced back in December last year after the metropolis introduced a series of policies to spur the property market, according to the latest statistics.
As many as 15,300 pre-owned apartments changed hands last month, a gain of 9 percent from November and a jump of 23 percent from a year ago, according to data released by think tank Shanghai Lianjia Research Institute today. The transaction value of these 15,300 apartments soared 16 percent month on month and 26 percent year on year to CNY54.6 billion (USD7.7 billion), it added.
Sales of new apartments in the metropolis surged 27 percent in December from November to 6,708 units, while the transaction amount soared 37 percent to CNY54.3 billion, according to data published by the think tank on Jan. 3. Year on year, sales of new apartments and the value plunged 22 percent.
Over the course of 2023, sales of pre-owned apartments jumped 13 percent from the year before to 180,100 units and the transaction amount climbed 16 percent to CNY605.5 billion (USD85.3 billion). But over the same period, sales of new builds tumbled 11 percent to 79,742 units and the value slumped 7 percent to CNY605 billion.
Shanghai’s property market weakened in the second half last year after a relatively strong first half. Sales of second-hand homes generally averaged 14,000 sets a month, still showing signs of vitality despite falling from the high levels over the past two years, it added.
Shanghai and Beijing rolled out more supportive policies last month, including lowering the down payment ratio for first time house buyers, trimming mortgage rates, and relaxing the standards for so-called ‘ordinary residency’, which refers to apartments that are below certain standards in terms of size and price and thus are eligible for tax reductions and exemptions. After the adjustments, the price is no longer included as one of the factors to recognize this kind of residency.
The introduction of new policies has improved buyer sentiment and made the property market busier, the research body said. They will encourage more people to buy their first home and improve their living conditions. The market remains mild with no sign of overheated prices, it added.
Editor: Kim Taylor
Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: My company is temporarily relocating me to Shanghai for two years. I’m thinking about buying a home there, but does it make sense to do so if I’m going to sell the property when I move back?
Tax-wise, it’s not necessarily a good idea to buy a home in Shanghai for a two-year period unless you believe home prices there will rise significantly, said Michael W. Galligan, partner in the Trusts & Estates Department of Phillips Nizer LLP in New York City.
Buying a home in Shanghai will mean that you will need to file tax returns in both the U.S. and China, Mr. Galligan said. Therefore, tax compliance becomes considerably more complicated and costly.
More:How Does a Foreign Buyer Get Around the Residency Requirements of Certain Countries?
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Also, you may not get full credit for the China tax when you pay your U.S. taxes, he pointed out. And finally, it’ll be incumbent upon you to make sure you understand all the tax aspects of buying in China and retain competent Chinese tax advisers and tax preparers.
Then, when you are ready to sell your home in Shanghai, you will likely be subject to both capital gains tax in China (currently 20%) and in the U.S. (as much as 20%), Mr. Galligan said.
In the U.S., you may also have to pay the 3.8% Medicare tax, also known as the Net Investment Income Tax (NIIT), and any state income tax on the profit from the sale of the home. NIIT kicks in when modified adjusted gross income is $200,000 or more for single taxpayers or $250,000 for married couples filing jointly.
State income tax applies while you were in China if you were a resident of a U.S. state that has a state income tax, or you sell the home during a year that you establish residence in such a state, Mr. Galligan explained.
It’s worth noting, he said, that if you opt not to go to China and instead buy a house in the U.S. and then selling it after the same two-year period, the taxes would be similar to what you’d pay on a home in Shanghai if you’d bought and relocated there.
More:What are the Top Tax Concerns When Flipping a Home in the U.S.?
But that shouldn’t rule out buying the property in Shanghai. If real estate prices there are expected to rise over the next two years, a home purchase may be “an opportunity to earn some U.S. tax-free income,” said Jenny C. Lin, principal of Lin Tax Law in Walnut Creek, California.
Just as taxpayers in the United States can keep as much as $250,000 tax free in profits from the sale of their principal residence stateside through the home sale gain exclusion, so, too, can Americans who sell their homes abroad. “There is no requirement that the principal residence be located in the United States,” Ms. Lin said.
To claim this exclusion, the taxpayer must have owned and used the property as their principal residence for an aggregate of two years or more, she said.
A married couple filing a joint tax return doesn’t have to pay taxes on the first $500,000 from the sale of their home if they used the property as their principal residence and if neither spouse had used this exclusion within two years, Ms. Lin said.
More:What Could Be the Implications of Trump’s Tax Code Proposals on Global Investment?
If the home is sold before the two-year mark, because of health reasons or certain other unforeseen circumstances, partial exclusions may apply, she noted.
“You may not necessarily receive a credit or offset of $1 U.S. tax for every $1 dollar equivalent of tax that you pay to China,” Mr. Galligan said. So before buying, have your U.S. accountant or tax preparer run a draft calculation to verify whether your U.S. credit would fully offset the Chinese tax, and be sure to consult with a professional in China.
“The rules and requirements are complex,” Ms. Lin said, emphasizing the importance of working with a tax return preparer knowledgeable about income and information reporting involving cross-border situations. “U.S. taxpayers are required to report income on a worldwide basis and may also be required to report certain foreign assets or transactions.”
Therefore, buying and selling a home in Shanghai “is a lot of trouble to go through unless you think the market for residential properties [there] is going to significantly appreciate over the two-year period and that the likely profit makes all these steps worthwhile,” Mr. Galligan said.
Email your questions to editors@mansionglobal.com. Check for answers weekly at www.mansionglobal.com.